Refereed journal articles
Evasive Lying in Strategic Communication (with Bettina Rockenbach and Peter Werner), Journal of Public Economics, accepted.
Abstract: Information asymmetries in economic transactions are omnipresent and a regular source of fraudulent behavior. In a theoretical and an experimental analysis of a sender-receiver game we investigate whether sanctions for lying induce more truth-telling. The novel aspect in our model is that senders may not only choose between truth-telling and (explicit) lying, but may also engage in evasive lying by credibly pretending not to know. While we find that sanctions promote truth-telling when senders cannot engage in evasive lying, this is no longer true when evasive lying is possible. Then, explicit lying is largely substituted by evasive lying, which completely eliminates the otherwise positive effect of sanctions on the rate of truth-telling. As outlined in our model, the necessary prerequisite for such an ‘erosion’ effect is that evasive lying is perceived as sufficiently less psychologically costly than direct lying. Evidence from our experimental data and a survey conducted with additional participants indicate that the shift towards evasion can indeed be attributed to lower psychological costs. Overall, our results clearly demonstrate the limitations of sanctioning lying to counteract the exploitation of informational asymmetries and may explain the empirical evidence from the finance industry that sanctions for financial misconduct eventually appear to be not very effective.
Testing Guilt Aversion with an Exogenous Shift in Beliefs, Games and Economic Behavior, Volume 97, May 2016, 110-119.
Abstract: We conduct a laboratory experiment to test whether subjects tend to meet the expectations of others (the guilt aversion hypothesis). The specificity of our approach is that second-order beliefs are manipulated exogenously just by changing the parameters of the experimental game. In particular, we consider a simple communication game where the sender is perfectly informed about his material benefit from lying to the receiver. At the same time, the receiver knows only the ex-ante distribution of the sender's material incentives. By changing this distribution between the experimental treatments, we achieve an exogenous variation in the receiver's payoff expectations (and hence in the corresponding sender's second-order beliefs) while keeping the sender's actual material incentives fixed. The results show that the rate of lying is significantly lower when the receiver is supposed to have higher payoff expectations, however only in the case when the monetary incentives for lying are fixed at a moderate level.
Surprising Gifts - Theory and Laboratory Evidence (with Axel Ockenfels and Peter Werner), Journal of Economic Theory, Volume 159 (A), September 2015, 163-208.
Abstract: People do not only feel guilt from not living up to others' expectations (Battigalli and Dufwenberg (2007)), but may also like to exceed them. We propose a model that generalizes the guilt aversion model to capture the possibility of positive surprises when making gifts. A model extension allows decision makers to care about others' attribution of intentions behind surprises. We test the model in a series of dictator game experiments. We find a strong causal effect of recipients' expectations on dictators' transfers. Moreover, in line with our model, the correlation between transfers and expectations can be both positive and negative, obscuring the effect in the aggregate. Finally, we provide evidence that dictators care about what recipients know about the intentions behind surprises.
Chapters in books
Exploitative Strategies: Consequences for Individual Behavior, Social Structure, and Design of Institutions (with Ben Greiner, Andrew J. King, Michael Kosfeld, Sasha R. X. Dall, Tatsuya Kameda, Wolfgang Leininger, Claus Wedekind, and Bruce Winterhalder). In: L-A. Giraldeau, P. Heeb, and M. Kosfeld (eds.): Investors and Exploiters in Ecology and Economics: Principles and Applications. Strüngmann Forum Reports, vol. 21 (J. Lupp, series editor), MIT Press, 2017, 205-214.
Abstract: Within a simple binary states model, we study strategic information transmission and acquisition between agents holding different priors and who are averse to perceived disagreement in posteriors. In a simple disclosure game, we find that for a given quality of information, full disclosure is feasible only if the receiver's (R) prior is close enough to one minus the sender's (S) prior. If full disclosure is not feasible, then S only fully discloses information congruent with the relative bias of the player whose prior is the most extreme. In a game of cheap talk with costly lying, we find that a more informative signal may lead to more noisy communication and less learning by R. Finally, in a game of voluntary joint exposure to a public signal with a random cost of participation, we find that 1) the player whose prior is most extreme is the most eager to participate, 2) the probability that both agree to participate is maximized when priors are symmetric around 1/2 and not too extreme and 3) for symmetric priors and perfectly informative signals, the expected ex post disagreement may be locally decreasing in the difference in priors. Finally, we show that the assumed preferences arise endogenously within a simple game of collective decision making by compromise.
Abstract: We study strategic communication between a customer and an advisor who is privately informed about the best suitable choice for the customer, but whose preferences are misaligned with the customer’s preferences. The advisor sends a message to the customer who, in turn, can secure herself from bad advice by acquiring costly information on her own. We find that making the customer’s information acquisition less costly, e.g., through consumer protection regulation or digital information aggregation and dissemination, leads to less prosocial behavior of the advisor. This can be explained by a model of shared guilt, which predicts a shift in causal attribution of guilt from the advisor to the customer if the latter could have avoided her ex post disappointment.
Abstract: We study equilibrium reporting behavior in Fischbacher and Föllmi-Heusi (2013) type cheating games when agents have a fixed cost of lying and image concerns not to be perceived as a liar. We show that equilibria naturally arise in which agents with low costs of lying randomize among a set of the highest potential reports. Such equilibria induce a distribution of reports in line with observed experimental patterns. We also find that higher image concerns lead to an increase in the range of reported lies while the effect of the fixed cost of lying is the opposite.
The Hidden Value of Lying: Evasion of Guilt in Expert Advice
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. Such preferences lead to the endogenous emergence of evasive communication, i.e., misreporting of the precision of obtained information. In turn, this gives rise to specific predictions regarding 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 under certain conditions. Besides, dealing with ex-ante less informed sender can be beneficial to the receiver.
The Cost of Evasion (with Gilad Tirosh)
Abstract: This paper provides results from an experiment that compares the effect of the form of communication on the rate of deception in a cheap talk and a verifiable disclosure setting. The form of communication is varied between self-formulated and pre-specified messages. We find that free-form communication significantly reduces lying in the cheap-talk setting, while has no effect in the verifiable disclosure setting. This suggests that lying about the state of the world (in the cheap-talk setting) is more costly than that about own information set (in the verifiable disclosure setting).