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The Hidden Value of Lying: Evasion of Guilt in Expert Advice

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  • Kiryl Khalmetski

Abstract

I develop a model of strategic communication between an uninformed receiver and a partially informed sender who is averse to lying. The sender's cost of lying is endogenous, depending on the receiver's beliefs induced by the sender's message, rather than on its exogenous formulation. One of my main findings is that this leads to the endogenous emergence of evasive communication, i.e., pretending to be uninformed, even when communication is completely unrestricted. Furthermore, the belief-dependent cost of lying gives rise to specific predictions regarding the welfare implications of several conventional policies. In particular, prohibition of lying (i.e., of explicit falsification) may lead to a decrease in the receiver's welfare. In addition, dealing with an ex-ante less informed sender can be beneficial to the receiver. The results are attributed exclusively to belief-dependent preferences and cannot be explained by an outcome-based model.

Suggested Citation

  • Kiryl Khalmetski, 2013. "The Hidden Value of Lying: Evasion of Guilt in Expert Advice," 2013 Papers pkh266, Job Market Papers.
  • Handle: RePEc:jmp:jm2013:pkh266
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    References listed on IDEAS

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    1. Khalmetski, Kiryl & Ockenfels, Axel & Werner, Peter, 2015. "Surprising gifts: Theory and laboratory evidence," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 163-208.
    2. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
    3. Navin Kartik, 2009. "Strategic Communication with Lying Costs," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1359-1395.
    4. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    5. Guerra, Gerardo & John Zizzo, Daniel, 2004. "Trust responsiveness and beliefs," Journal of Economic Behavior & Organization, Elsevier, vol. 55(1), pages 25-30, September.
    6. Gruber, Jon & Kim, John & Mayzlin, Dina, 1999. "Physician fees and procedure intensity: the case of cesarean delivery," Journal of Health Economics, Elsevier, vol. 18(4), pages 473-490, August.
    7. Kartik, Navin & Ottaviani, Marco & Squintani, Francesco, 2007. "Credulity, lies, and costly talk," Journal of Economic Theory, Elsevier, vol. 134(1), pages 93-116, May.
    8. 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.
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    Cited by:

    1. Khalmetski, Kiryl & Rockenbach, Bettina & Werner, Peter, 2017. "Evasive Lying in Strategic Communication," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168119, Verein für Socialpolitik / German Economic Association.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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