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Truth-telling and trust in sender–receiver games with intervention: an experimental study

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  • Mehmet Gurdal
  • Ayca Ozdogan
  • Ismail Saglam

Abstract

Recent experimental studies find excessive truth-telling in sender–receiver games. We show that this phenomenon is robust to the random intervention of a truthful regulator. In addition, intervention significantly increases the excessive trust of receivers while the overall percentage of truthful messages received does not change much with or without intervention. We offer a theoretical explanation for the behavior of senders and receivers, using a logit agent quantal response equilibrium (logit-AQRE) model incorporating a non-monetary lying cost for senders (like Peeters et al. in Scand J Econ 115(2):508–548, 2013 ). We show that our experimental findings are all consistent with the predictions of this model. Moreover, we find that the lying cost is significantly higher under intervention, implying that truthful intervention is beneficial for receivers and justified as a tool for policy makers acting on behalf of informationally inferior parties. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Mehmet Gurdal & Ayca Ozdogan & Ismail Saglam, 2014. "Truth-telling and trust in sender–receiver games with intervention: an experimental study," Review of Economic Design, Springer;Society for Economic Design, vol. 18(2), pages 83-103, June.
    • Handle: RePEc:spr:reecde:v:18:y:2014:i:2:p:83-103
    DOI: 10.1007/s10058-013-0155-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Strategic information transmission; Truth-telling; Trust; Sender–receiver game; Intervention; C90; D63; D64;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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