Hiding an Inconvenient Truth: Lies and Vagueness (Revision of DP 2008-107)

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Abstract

When truth conflicts with efficiency, can verbal communication destroy efficiency? Or are lies or vagueness used to hide inconvenient truths? We consider a sequential 2-player public good game in which the leader has private information about the value of the public good. This value can be low, high, or intermediate, with the latter case giving rise to a prisoners’ dilemma. Without verbal communication, efficiency is achieved, with contributions for high or intermediate values. When verbal com- munication is added, the leader has an incentive to hide the precise truth when the value is intermediate. We show experimentally that, when communication about the value must be precise, the leader frequently lies, preserving efficiency by exaggerating. When communication can be vague, the leader turns to vague messages when the value is intermediate, but not when it is high. Thus, she implicitly reveals all values. Inter- estingly, efficiency is still preserved, since the follower ignores messages altogether and does not seem to realize that vague messages hide inconvenient truths.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages29
Volume2010-80
Publication statusPublished - 2010

Publication series

NameCentER Discussion Paper
Volume2010-80

Keywords

  • Communication
  • Efficiency
  • Lying
  • Public Goods.

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