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The value of lies in an ultimatum 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 often lie strategically. We study this problem in an ultimatum game involving informed proposers and uninformed responders, where the former can send an unverifiable statement about their endowment. If there are some intrinsically honest proposers, a simple message game shows that the rest of them are likely to declare a lower-than-actual endowment to the responders. In the second part of the paper, we report on an experiment testing this game. On average, 88.5% of the proposers understate the actual endowment by 20.5%. Regression analysis shows that a one-dollar gap between the actual and declared amounts prompts proposers to reduce their offer by 19 cents. However, responders appear not to take such claims seriously, and thus the frequency of rejections should increase. The consequence is a net welfare loss, that is specific to such a "free-to-lie" environment.

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Paper provided by HAL in its series Post-Print with number hal-00692139.

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Date of creation: 16 Apr 2012
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Handle: RePEc:hal:journl:hal-00692139
Note: View the original document on HAL open archive server: http://hal-essec.archives-ouvertes.fr/hal-00692139
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  1. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  2. Damien Besancenot & Delphine Dubart & Radu Vranceanu, 2012. "The value of lies in a power-to-take game with imperfect information," Post-Print hal-00690409, HAL.
  3. Ying Chen & Navin Kartik & Joel Sobel, 2008. "Selecting Cheap-Talk Equilibria," Econometrica, Econometric Society, vol. 76(1), pages 117-136, 01.
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  12. Kartik, Navin & Ottaviani, Marco & Squintani, Francesco, 2007. "Credulity, lies, and costly talk," Journal of Economic Theory, Elsevier, vol. 134(1), pages 93-116, May.
  13. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  14. 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.
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  16. 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.
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