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Information asymmetry and deception.

Clots-Figueras I, Hernán-González R, Kujal P - Front Behav Neurosci (2015)

Bottom Line: Situations such as an entrepreneur overstating a project's value, or a superior choosing to under or overstate the gains from a project to a subordinate are common and may result in acts of deception.We find greater lying when the distribution of the multiplier is unknown by the investors than when they know the distribution.Further, messages make beliefs about the multiplier more pessimistic when the investors know the distribution of the multiplier, while the opposite is true when they do not know the distribution.

View Article: PubMed Central - PubMed

Affiliation: Department of Economics, Universidad Carlos III de Madrid Spain.

ABSTRACT
Situations such as an entrepreneur overstating a project's value, or a superior choosing to under or overstate the gains from a project to a subordinate are common and may result in acts of deception. In this paper we modify the standard investment game in the economics literature to study the nature of deception. In this game a trustor (investor) can send a given amount of money to a trustee (or investee). The amount received is multiplied by a certain amount, k, and the investee then decides on how to divide the total amount received. In our modified game the information on the multiplier, k, is known only to the investee and she can send a non-binding message to the investor regarding its value. We find that 66% of the investees send false messages with both under and over, statement being observed. Investors are naive and almost half of them believe the message received. We find greater lying when the distribution of the multiplier is unknown by the investors than when they know the distribution. Further, messages make beliefs about the multiplier more pessimistic when the investors know the distribution of the multiplier, while the opposite is true when they do not know the distribution.

No MeSH data available.


Distribution of beliefs by treatment. Note: Proportion of subjects by treatment who believed that the value of k was 2, 3, or 4.
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Figure 3: Distribution of beliefs by treatment. Note: Proportion of subjects by treatment who believed that the value of k was 2, 3, or 4.

Mentions: Figure 3 shows the distribution of beliefs by treatment.15 When no message was sent (234_No), investors were more likely to believe that k would take low values, only 11% thought that it took the value of 4, while 50% thought it was 3 (the expected value). In those treatments where a message was sent (234_ExAnte and 234_ExPost), beliefs were even more pessimistic, as a larger fraction of individuals thought that k took the values 2 or 3. The effect of the message was then to induce investors to believe that returns were lower. In fact, in the treatment “234_ExAnte,” 63, 29, and 9% of investors thought that the value of k was 2, 3, and 4, respectively. This distribution is significantly different from the one corresponding to the treatment 234_No (Kruskal–Wallis test p = 0.0547). In the treatment “234_ExPost,” 53, 44, and 3% of investors believed that the value of k was 2, 3, and 4, respectively. In this case the difference with 234_No is not significant (Kruskal–Wallis test p = 0.1394), but the number of observations is lower.


Information asymmetry and deception.

Clots-Figueras I, Hernán-González R, Kujal P - Front Behav Neurosci (2015)

Distribution of beliefs by treatment. Note: Proportion of subjects by treatment who believed that the value of k was 2, 3, or 4.
© Copyright Policy
Related In: Results  -  Collection

License
Show All Figures
getmorefigures.php?uid=PMC4508524&req=5

Figure 3: Distribution of beliefs by treatment. Note: Proportion of subjects by treatment who believed that the value of k was 2, 3, or 4.
Mentions: Figure 3 shows the distribution of beliefs by treatment.15 When no message was sent (234_No), investors were more likely to believe that k would take low values, only 11% thought that it took the value of 4, while 50% thought it was 3 (the expected value). In those treatments where a message was sent (234_ExAnte and 234_ExPost), beliefs were even more pessimistic, as a larger fraction of individuals thought that k took the values 2 or 3. The effect of the message was then to induce investors to believe that returns were lower. In fact, in the treatment “234_ExAnte,” 63, 29, and 9% of investors thought that the value of k was 2, 3, and 4, respectively. This distribution is significantly different from the one corresponding to the treatment 234_No (Kruskal–Wallis test p = 0.0547). In the treatment “234_ExPost,” 53, 44, and 3% of investors believed that the value of k was 2, 3, and 4, respectively. In this case the difference with 234_No is not significant (Kruskal–Wallis test p = 0.1394), but the number of observations is lower.

Bottom Line: Situations such as an entrepreneur overstating a project's value, or a superior choosing to under or overstate the gains from a project to a subordinate are common and may result in acts of deception.We find greater lying when the distribution of the multiplier is unknown by the investors than when they know the distribution.Further, messages make beliefs about the multiplier more pessimistic when the investors know the distribution of the multiplier, while the opposite is true when they do not know the distribution.

View Article: PubMed Central - PubMed

Affiliation: Department of Economics, Universidad Carlos III de Madrid Spain.

ABSTRACT
Situations such as an entrepreneur overstating a project's value, or a superior choosing to under or overstate the gains from a project to a subordinate are common and may result in acts of deception. In this paper we modify the standard investment game in the economics literature to study the nature of deception. In this game a trustor (investor) can send a given amount of money to a trustee (or investee). The amount received is multiplied by a certain amount, k, and the investee then decides on how to divide the total amount received. In our modified game the information on the multiplier, k, is known only to the investee and she can send a non-binding message to the investor regarding its value. We find that 66% of the investees send false messages with both under and over, statement being observed. Investors are naive and almost half of them believe the message received. We find greater lying when the distribution of the multiplier is unknown by the investors than when they know the distribution. Further, messages make beliefs about the multiplier more pessimistic when the investors know the distribution of the multiplier, while the opposite is true when they do not know the distribution.

No MeSH data available.