The Way People Lie in Markets

63 Pages Posted: 17 Jul 2020

See all articles by Marie Claire Villeval

Marie Claire Villeval

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

Chloe Tergiman

The Pennsylvania State University

Multiple version iconThere are 2 versions of this paper

Date Written: June 25, 2020

Abstract

In a finitely repeated game with asymmetric information, we experimentally study how reputation and standard market mechanisms change the nature of fraudulent announcements by experts. While some lies can be detected ex post by investors, other lies remain deniable. Lying behavior suggests that individuals care more about the consequences of being caught, rather than the act of lying per se. Allowing for reputation reduces the frequency of lies that can be detected but has no impact on deniable lies: individuals simply hide their lies better and fraud persists. Competition without reputation increases risky lies and never protects investment.

Keywords: Dishonesty, Reputation, Competition, Financial Markets, Experiment

JEL Classification: C91, D01, G41, M21

Suggested Citation

Villeval, Marie Claire and Tergiman, Chloe, The Way People Lie in Markets (June 25, 2020). Available at SSRN: https://ssrn.com/abstract=3635302 or http://dx.doi.org/10.2139/ssrn.3635302

Marie Claire Villeval (Contact Author)

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

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+33 472 86 60 79 (Phone)
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HOME PAGE: http://www.gate.cnrs.fr/equipe/perso/villeval/villeval.html

IZA Institute of Labor Economics

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Germany

Global Labor Organization (GLO) ( email )

Collogne
Germany

Chloe Tergiman

The Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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