Do Liars Believe? Beliefs and Other-Regarding Preferences in Disclosure Settings

Posted: 16 Jan 2011 Last revised: 8 May 2015

See all articles by Timothy W. Shields

Timothy W. Shields

Chapman University - The George L. Argyros College of Business and Economics; Chapman University - Economic Science Institute

Roman M. Sheremeta

Case Western Reserve University

Date Written: January 14, 2011

Abstract

Motivated by the analyst and investor setting we examine the behavior of subjects playing both roles of sender and receiver in an information transmission game. We also elicit the subjects’ beliefs of others’ strategic behavior, risk and other-regarding preferences. The results of the experiment indicate that 60 percent of senders adopt deceptive strategies by misreporting information. Nevertheless, 67 percent of receivers appear to believe senders by investing. The trusting behavior of receivers cannot be explained by a standard equilibrium (only 33 percent of subjects behave consistently with equilibrium predictions). However, it can be rationalized by accounting for beliefs (68 percent of subjects behave consistently with their own beliefs). Finally, the honest behavior of some senders can be explained by other-regarding preferences. Thus we find liars do believe, and honest individuals care about the payoffs of others’.

Keywords: experiment, strategic communication, level-n thinking, beliefs

JEL Classification: C72, C91, D82, D83

Suggested Citation

Shields, Timothy W. and Sheremeta, Roman M., Do Liars Believe? Beliefs and Other-Regarding Preferences in Disclosure Settings (January 14, 2011). CAAA Annual Conference 2011, Journal of Economic Behavior and Organization, 94 (2013) 268–277, Available at SSRN: https://ssrn.com/abstract=1740638

Timothy W. Shields (Contact Author)

Chapman University - The George L. Argyros College of Business and Economics ( email )

1 University Drive
Orange, CA 92866
United States

Chapman University - Economic Science Institute ( email )

1 University Drive
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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