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The value of lies in a power-to-take game with imperfect information

  • Damien Besancenot

    ()

    (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris XIII - Paris Nord - CNRS : UMR7234)

  • Delphine Dubart

    (ESSEC Business School - ESSEC Business School)

  • Radu Vranceanu

    ()

    (Economics Department - ESSEC Business School)

Humans can lie strategically in order to leverage on their negotiation power. For instance, governments can claim that a "scapegoat" third party is responsible for reforms that impose higher costs on citizens, in order to make the pill sweeter. This paper analyzes such communication strategy within a variant of the ultimatum game. The first player gets an endowment, and the second player can impose a tax on it. The former can reject the allocation submitted by the tax-setter. A third party is then allowed to levy its own tax, and its intake is private information to the tax-setter. In a frameless experiment, 65% of the subjects in the tax-setter role overstate the tax levied by the third party in order to manipulate taxpayer's expectations and submit less advantageous offers; on average, for every additional currency unit of lie, measured by the gap between the claimed and the actual tax, they would reduce their offer by 0.43 currency units.

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Paper provided by HAL in its series Post-Print with number hal-00690409.

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Date of creation: 16 Mar 2012
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Handle: RePEc:hal:journl:hal-00690409
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  1. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
  2. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
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  4. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  5. Croson, Rachel T. A., 1996. "Information in ultimatum games: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 30(2), pages 197-212, August.
  6. Hessel Oosterbeek & Randolph Sloof & Gijs van de Kuilen, 2004. "Cultural differences in ultimatum game experiments: Evidence from a meta-analysis," Experimental 0401003, EconWPA.
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  9. Mitzkewitz, Michael & Nagel, Rosemarie, 1993. "Experimental Results on Ultimatum Games with Incomplete Information," International Journal of Game Theory, Springer, vol. 22(2), pages 171-98.
  10. Navin Kartik, 2008. "Strategic Communication with Lying Costs," 2008 Meeting Papers 350, Society for Economic Dynamics.
  11. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  12. Christoph Vanberg, 2008. "Why Do People Keep Their Promises? An Experimental Test of Two Explanations -super-1," Econometrica, Econometric Society, vol. 76(6), pages 1467-1480, November.
  13. Croson, Rachel & Boles, Terry & Murnighan, J. Keith, 2003. "Cheap talk in bargaining experiments: lying and threats in ultimatum games," Journal of Economic Behavior & Organization, Elsevier, vol. 51(2), pages 143-159, June.
  14. Lundquist, Tobias & Ellingsen, Tore & Gribbe, Erik & Johannesson, Magnus, 2009. "The aversion to lying," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 81-92, May.
  15. Li Hao & Daniel Houser, 2011. "Honest Lies," Working Papers 1021, George Mason University, Interdisciplinary Center for Economic Science.
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