Who cares when Value (Mis)reporting may be found out? An Acquiring-a-Company experiment with value messages and information leaks

Daniela Di Cagno, Werner Güth, Tim Lohse, Francesca Marazzi and Lorenzo Spadoni

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2024, vol. 108, issue C

Abstract: We modify the Acquiring-a-Company game to study how information leaks affect lying and market outcomes in an ultimatum bargaining setting with asymmetric information. Privately informed sellers send messages about the alleged value of their company to potential buyers. Via random leaks buyers, however, can learn the true value before proposing a price which the seller finally accepts or not. Only 14.5% of the messages are truthful, whereas two-thirds of all sellers exaggerate the company’s value to persuade buyers to offer more, especially when the true value is small. Although a higher leak probability does not reduce the frequency of misreporting, it weakens overreporting and strengthens underreporting. Buyers who found out value misreporting anchor their price proposals on the true value but do not explicitly discriminate against liars. Sellers are mainly opportunistic and make their acceptances dependent on the resulting positive payoff. Even if ethical concerns do not seem to matter much, probabilistic leaks are welfare enhancing.

Keywords: Acquiring-a-company experiments; Information leaks; Cheap talk; (Not) lying; Ultimatum bargaining (search for similar items in EconPapers)
JEL-codes: C78 C91 D83 D91 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2214804323001775
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Who Cares When Value (Mis)Reporting May Be Found Out? An Acquiring-a-Company Experiment with Value Messages and Information Leaks (2023)
Working Paper: Who cares when Value (Mis)reporting May Be Found Out? An Acquiring-a-Company Experiment with Value Messages and Information Leaks (2022)
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:soceco:v:108:y:2024:i:c:s2214804323001775

DOI: 10.1016/j.socec.2023.102151

Access Statistics for this article

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics) is currently edited by Pablo Brañas Garza

More articles in Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics) from Elsevier
Bibliographic data for series maintained by Catherine Liu ().