Do Liars Believe? Beliefs and Other-Regarding Preferences in the Sender-Receiver Game

26 Pages Posted: 4 Feb 2011 Last revised: 25 Jun 2014

See all articles by Timothy W. Shields

Timothy W. Shields

Chapman University - George L. Argyros School of Business & Economics; Chapman University - Economic Science Institute

Roman M. Sheremeta

Case Western Reserve University

Date Written: February 1, 2011

Abstract

We examine subjects’ behavior in sender-receiver games where there are gains from trade and alignment of interests in one of the two states. We elicit subjects’ beliefs, risk and other-regarding preferences. Our design also allows us to examine the behavior of subjects in both roles, to determine whether the behavior in one role is the best response to the subject’s own behavior in the other role. The results of the experiment indicate that 60 percent of senders adopt deceptive strategies by sending favorable message when the true state of the nature is unfavorable. Nevertheless, 67 percent of receivers invest conditional upon a favorable message. The investing behavior of receivers cannot be explained by risk preferences or as a best response to subject’s own behavior in the sender’s role. However, it can be rationalized by accounting for elicited beliefs and other-regarding preferences. Finally, the honest behavior of some senders can be explained by other-regarding preferences. Thus we find liars do believe, and individuals who care about the payoffs of others tend to be honest.

Keywords: experiment, strategic communication, beliefs, lying, deception, other-regarding preferences

JEL Classification: C72, C91, D82, D83

Suggested Citation

Shields, Timothy W. and Sheremeta, Roman M., Do Liars Believe? Beliefs and Other-Regarding Preferences in the Sender-Receiver Game (February 1, 2011). Journal of Economic Behavior and Organization, 94 (2013) 268–277. Available at SSRN: https://ssrn.com/abstract=1754173 or http://dx.doi.org/10.2139/ssrn.1754173

Timothy W. Shields (Contact Author)

Chapman University - George L. Argyros School of Business & Economics ( email )

One University Drive
Orange, CA 92866
United States
714.289.2092 (Phone)

HOME PAGE: http://sites.google.com/site/timothywshields/

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States

Roman M. Sheremeta

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

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