Behavioral Forces Driving Information Unraveling

Volker Benndorf, Dorothea Kübler and Hans-Theo Normann
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Volker Benndorf: Goethe-Universität Frankfurt
Hans-Theo Normann: Universität Düsseldorf

No 354, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: Information unraveling is an elegant theoretical argument suggesting that private information may be fully and voluntarily surrendered. The experimental literature has, however, failed to provide evidence of complete unraveling and has suggested senders' limited depth of reasoning as one behavioral explanation. In our novel design, decision-making is essentially sequential, which removes the requirements on subjects' reasoning and should enable subjects to play the standard Nash equilibrium with full revelation. However, our design also facilitates coordination on equilibria with partial unraveling which exist with other-regarding preferences. Our data confirm that the new design is successful in that it avoids miscoordination entirely. Roughly half of the groups fully unravel whereas other groups exhibit monotonic outcomes with partial unraveling. Altogether, we nd more information unraveling with the new design, but there is clear evidence that other-regarding preferences do play a role in impeding unraveling.

Keywords: data protection; inequality aversion; information revelation; level-k reasoning (search for similar items in EconPapers)
JEL-codes: C72 C90 C91 (search for similar items in EconPapers)
Date: 2022-12-22
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-gth
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Working Paper: Behavioral forces driving information unraveling (2022)
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