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Vague lies and lax standards of proof: On the law and economics of advice

Mikhail Drugov () and Marta Troya-Martinez ()
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Marta Troya-Martinez: New Economic School and CEPR

Authors registered in the RePEc Author Service: Marta Troya Martinez ()

No w0246, Working Papers from Center for Economic and Financial Research (CEFIR)

Abstract: This paper analyses a persuasion game where a seller provides (un)biased and (im)precise advice and may be fined by an authority for misleading the buyers. In the equilibrium, biasing the advice and making it noisier are complements. The advice becomes both more biased and less precise with a stricter standard of proof employed by the authority, a larger share of credulous consumers, and a higher buyers' heterogeneity. The optimal policy of the authority is characterized in terms of a standard of proof and resources devoted to the investigation.

Keywords: Advice; Persuasion; Legal Procedure; Consumer Protection (search for similar items in EconPapers)
JEL-codes: D18 D8 K4 L1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-knm, nep-law and nep-mic
Date: 2018-06
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Handle: RePEc:cfr:cefirw:w0246