Hiding an Inconvenient Truth: Lies and Vagueness

Games and Economic Behavior (2011), 244-261

TILEC Discussion Paper No. 2010-029 (Revision of 2008-047)

CentER Discussion Paper Series No. 2010-80 (Revision of 2008-107)

30 Pages Posted: 6 Aug 2010 Last revised: 14 Feb 2015

See all articles by Marta Serra-Garcia

Marta Serra-Garcia

University of California, San Diego (UCSD) - Rady School of Management

Eric van Damme

TILEC and CentER, Tilburg University

Johannes (Jan) J. M. Potters

Tilburg University - CentER

Date Written: July 1, 2010

Abstract

We examine communication in a 2-player sequential public good game in which the leader has private information about the return from contributing to it. The leader decides first and the follower observes the leader's contribution, before deciding whether or not to contribute. Without communication, the unique equilibrium is fully efficient. We study whether the introduction of communication about returns can destroy efficiency. Communication can be precise (about the exact return), or vague. If leaders would communicate precisely and truthfully, they would reveal that followers would do best to free ride, thereby distorting both players' incentives to invest and destroying efficiency. We show that leaders lie in order to avoid these negative consequences. If vague messages are allowed, the extent of lying drops and vague messages are used instead. Overall, followers contribute when the leader does, and the introduction of communication neither increases nor decreases contributions to the public good.

Keywords: Communication, Efficiency, Lying, Public Goods

JEL Classification: C72, C92, D83, H41

Suggested Citation

Serra-Garcia, Marta and van Damme, Eric E.C. and Potters, Johannes (Jan) J. M., Hiding an Inconvenient Truth: Lies and Vagueness (July 1, 2010). Games and Economic Behavior (2011), 244-261; TILEC Discussion Paper No. 2010-029 (Revision of 2008-047); CentER Discussion Paper Series No. 2010-80 (Revision of 2008-107). Available at SSRN: https://ssrn.com/abstract=1653734 or http://dx.doi.org/10.2139/ssrn.1653734

Marta Serra-Garcia (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Eric E.C. Van Damme

TILEC and CentER, Tilburg University ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 3045 (Phone)
+31 13 466 3066 (Fax)

Johannes (Jan) J. M. Potters

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 8204 (Phone)
+31 13 466 3042 (Fax)

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