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Information asymmetry and deception.
Irma Clots-Figueras1, Roberto Hernán-González2, Praveen Kujal3
1Department of Economics, Universidad Carlos III de Madrid Spain.
Frontiers in Behavioral Neuroscience
|August 11, 2015
Summary
In economic games, deception is common. When investors lack information about multipliers, trustees are more likely to lie, influencing investor beliefs.
Area of Science:
- Behavioral Economics
- Game Theory
- Experimental Economics
Background:
- Deception is prevalent in economic transactions.
- Standard investment games offer a framework to study trust and deception.
- Information asymmetry can facilitate deceptive practices.
Purpose of the Study:
- To investigate the nature and prevalence of deception in a modified investment game.
- To analyze the impact of information asymmetry on deceptive behavior.
- To examine how investor beliefs are affected by trustee messages.
Main Methods:
- Modification of the standard economics investment game.
- Introduction of a trustee with private information about a multiplier (k).
- Analysis of trustee messaging strategies and investor responses.
Main Results:
- 66% of trustees sent false messages regarding the multiplier (k).
- Investors exhibited naivety, with nearly half believing the messages.
- Lying increased when investors were unaware of the multiplier's distribution.
Conclusions:
- Information asymmetry significantly increases deceptive behavior in economic interactions.
- Investor beliefs about potential gains are influenced by messages, especially when distributions are unknown.
- The study highlights the role of information in mitigating or exacerbating deception.
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