EconPapers    
Economics at your fingertips  
 

Evasive lying in strategic communication

Kiryl Khalmetski, Bettina Rockenbach and Peter Werner

Journal of Public Economics, 2017, vol. 156, issue C, 59-72

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.

Keywords: Lying; Sanction; Evasion; Sender-receiver game; Financial fraud (search for similar items in EconPapers)
JEL-codes: C91 D82 D83 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272717301664
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Evasive Lying in Strategic Communication (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:156:y:2017:i:c:p:59-72

DOI: 10.1016/j.jpubeco.2017.10.002

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-19
Handle: RePEc:eee:pubeco:v:156:y:2017:i:c:p:59-72