Experimental & Behavioural Economics Seminar - Marie Claire Villeval (University of Lyon)

Room 315, Level 3, FBE Building, 111 Barry Street, Carlton

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Siqi Pan

siqi.pan@unimelb.edu.au

Title: The Way People Lie in Markets

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, others remain deniable. Lying behavior suggests that individuals care more about the consequences of being caught, rather than being caught or 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.