The Way People Lie in Markets: Detectable vs. Deniable Lies

56 Pages Posted: 27 Sep 2019 Last revised: 10 Dec 2021

See all articles by Chloe Tergiman

Chloe Tergiman

The Pennsylvania State University

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS; IZA Institute of Labor Economics; Global Labor Organization (GLO)

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Date Written: December 10, 2021

Abstract

In a finitely repeated game with asymmetric information, we experimentally study how individuals adapt the nature of their lies when settings allow for reputation-building. While some lies can be detected ex post by the uninformed party, others remain deniable. We find that traditional market mechanisms such as reputation generate strong changes in the way people lie and lead to strategies in which individuals can maintain plausible deniability: people simply hide their lies better by substituting deniable lies for detectable lies. Our results highlight the limitations of reputation to root out fraud when a Deniable Lie strategy is available.

Keywords: Lying, Deniability, Reputation, Financial Markets, Experiment

JEL Classification: C91, D01, G41, M21

Suggested Citation

Tergiman, Chloe and Villeval, Marie Claire, The Way People Lie in Markets: Detectable vs. Deniable Lies (December 10, 2021). Available at SSRN: https://ssrn.com/abstract=3455904 or http://dx.doi.org/10.2139/ssrn.3455904

Chloe Tergiman

The Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Marie Claire Villeval (Contact Author)

Groupe d'Analyse et de Théorie Economique (GATE), CNRS ( email )

93, chemin des Mouilles
Ecully, 69130
France
+33 472 86 60 79 (Phone)
+33 472 86 60 90 (Fax)

HOME PAGE: http://sites.google.com/view/marie-claire-villeval

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Global Labor Organization (GLO) ( email )

Collogne
Germany

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