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The Hidden Value of Lying: Evasion of Guilt in Expert Advice

Kiryl Khalmetski

2013 Papers from Job Market Papers

Abstract: I develop a model of strategic communication between an uninformed receiver and a partially informed sender who is averse to lying. The sender's cost of lying is endogenous, depending on the receiver's beliefs induced by the sender's message, rather than on its exogenous formulation. One of my main findings is that this leads to the endogenous emergence of evasive communication, i.e., pretending to be uninformed, even when communication is completely unrestricted. Furthermore, the belief-dependent cost of lying gives rise to specific predictions regarding the welfare implications of several conventional policies. In particular, prohibition of lying (i.e., of explicit falsification) may lead to a decrease in the receiver's welfare. In addition, dealing with an ex-ante less informed sender can be beneficial to the receiver. The results are attributed exclusively to belief-dependent preferences and cannot be explained by an outcome-based model.

JEL-codes: C72 D82 D83 D84 (search for similar items in EconPapers)
Date: 2013-11-20
New Economics Papers: this item is included in nep-cta and nep-mic
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