The value of lies in a power-to-take game with imperfect information

Damien Besancenot, Delphine Dubart () and Radu Vranceanu
Additional contact information
Delphine Dubart: ESSEC Business School, Postal: Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY PONTOISE Cedex, FRANCE, http://www.essec.edu

No WP1205, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: Humans can lie strategically in order to leverage on their negotiation power. For instance, governments can claim that a "scapegoat" third party is responsible for reforms that impose higher costs on citizens, in order to make the pill sweeter. This paper analyzes such communication strategy within a variant of the ultimatum game. The first player gets an endowment, and the second player can impose a tax on it. The former can reject the allocation submitted by the tax-setter. A third party is then allowed to levy its own tax, and its intake is private information to the tax-setter. In a frameless experiment, 65% of the subjects in the tax-setter role overstate the tax levied by the third party in order to manipulate taxpayer’s expectations and submit less advantageous offers; on average, for every additional currency unit of lie, measured by the gap between the claimed and the actual tax, they would reduce their offer by 0.43 currency units.

Keywords: Ultimatum game; Taxation; Lies; Deception; Asymmetric information (search for similar items in EconPapers)
JEL-codes: C91 D82 D83 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2012-03-16
New Economics Papers: this item is included in nep-cta, nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: The value of lies in a power-to-take game with imperfect information (2012)
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