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How private is private information? The ability to spot deception in an economic game

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Abstract

We provide experimental evidence on the ability to detect deceit in a buyer-seller game with asymmetric information. Sellers have private information about the buyer's valuation of a good and sometimes have incentives to mislead buyers. We examine if buyers can spot deception in face-to-face encounters. We vary (1) whether or not the buyer can interrogate the seller, and (2) the contextual richness of the situation. We find that the buyers' prediction accuracy is above chance levels, and that interrogation and contextual richness are important factors determining the accuracy. These results show that there are circumstances in which part of the information asymmetry is eliminated by people's ability to spot deception.

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  • Michele Belot & Jeroen van de Ven, 2013. "How private is private information? The ability to spot deception in an economic game," ESE Discussion Papers 237, Edinburgh School of Economics, University of Edinburgh.
  • Handle: RePEc:edn:esedps:237
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    Keywords

    deception; lie detection; asymmetric information; face-to-face interaction; experiment;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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