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The Way People Lie in Markets: Detectable vs. Deniable Lies

Author

Listed:
  • Chloe Tergiman

    (Smeal College of Business, 334 Business Building, Penn State University)

  • Marie Claire Villeval

    (Univ Lyon, CNRS, GATE UMR 5824, 93 Chemin des Mouilles, F-69130, Ecully, France. IZA, Bonn, Germany)

Abstract

In a finitely repeated game with asymmetric information, we experimentally study how individuals adapt the nature of their lies when settings allow for reputation-building. While some lies can be detected ex post by the uninformed party, others remain deniable. We find that traditional market mechanisms such as reputation generate strong changes in the way people lie and lead to strategies in which individuals can maintain plausible deniability: people simply hide their lies better by substituting deniable lies for detectable lies. Our results highlight the limitations of reputation to root out fraud when a Deniable Lie strategy is available.

Suggested Citation

  • Chloe Tergiman & Marie Claire Villeval, 2021. "The Way People Lie in Markets: Detectable vs. Deniable Lies," Working Papers 2120, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:2120
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    File URL: ftp://ftp.gate.cnrs.fr/RePEc/2021/2120.pdf
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    Citations

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    Cited by:

    1. Despoina Alempaki & Valeria Burdea & Daniel Read, 2021. "Deceptive Communication: Direct Lies vs. Ignorance, Partial-Truth and Silence," CESifo Working Paper Series 9286, CESifo.
    2. Kaisa Kotakorpiⓡ & Tuomas Nurminenⓡ & Topi Miettinen ⓡ & Satu Metsälampiⓡ & Kaisa Kotakorpi, 2022. "Bearing the Burden - Implications of Tax Reporting Institutions and Image Concerns on Evasion and Incidence," CESifo Working Paper Series 9791, CESifo.

    More about this item

    Keywords

    Lying; Deniability; Reputation; Financial Markets; Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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