Universität zu Köln

Khahnetski, Kiryl, Rockenbach, Bettina ORCID: 0000-0003-2624-1964 and Werner, Peter (2017). Evasive lying in strategic communication. J. Public Econ., 156. S. 59 - 73. LAUSANNE: ELSEVIER SCIENCE SA. ISSN 0047-2727

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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.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Khahnetski, Kiryl UNSPECIFIED UNSPECIFIED UNSPECIFIED Rockenbach, Bettina UNSPECIFIED orcid.org/0000-0003-2624-1964 UNSPECIFIED Werner, Peter UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-208695
DOI:	10.1016/j.jpubeco.2017.10.002
Journal or Publication Title:	J. Public Econ.
Volume:	156
Page Range:	S. 59 - 73
Date:	2017
Publisher:	ELSEVIER SCIENCE SA
Place of Publication:	LAUSANNE
ISSN:	0047-2727
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Center of Excellence C-SEB Faculty of Management, Economics and Social Sciences > Economics > Microeconomics, Institutions and markets > Professorship for Experimental and Behavioral Economics Faculty of Management, Economics and Social Sciences > Economics > Microeconomics, Institutions and markets > Reinhard Selten Institute
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language INCOMPLETE INFORMATION; ULTIMATUM GAMES; TRUTH; DECEPTION; MARKETS; GUILT; CONSEQUENCES; INDIVIDUALS; COMPETITION; INCENTIVES Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/20869