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

Chloe Tergiman () and Marie Claire Villeval ()
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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

No 2120, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

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.

Keywords: Lying; Deniability; Reputation; Financial Markets; Experiment (search for similar items in EconPapers)
JEL-codes: C91 D01 G41 M21 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-exp and nep-gth
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Citations: View citations in EconPapers (2)

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