Truth or Consequences: An Experiment

Univ. Pompeu Fabra, Economics and Business Working Paper No. 437

35 Pages Posted: 26 Jun 2000

See all articles by Jordi Brandts

Jordi Brandts

Instituto de Analisis Economico (CSIC) Barcelona

Gary Charness

University of California, Santa Barbara (UCSB) - Department of Economics

Date Written: October 2002

Abstract

This paper presents evidence that the willingness to punish an unfair action is sensitive to whether this action was preceded by a deceptive message. One player first sends a message indicating an intended play, which is either favorable or unfavorable to the other player in the game. After the message, the sender and the receiver play a simultaneous 2x2 game, in which the sender may or may not play according to his message. Outcome cells may, hence, be reached following true or false messages. In the third stage the receiver may (at a cost) punish or reward, depending on which cell of the simultaneous game has been reached. We test whether receivers' rates of monetary sacrifice depend on the process by which an outcome is reached. We study two decision-elicitation methods: the strategy and the direct response methods. For each method, deception more than doubles the punishment rate as a response to an action that is unfavorable to the receiver. We also find evidence that 17-25% of all participants choose to reward a favorable action choice made by the sender, even though doing so leaves one at a payoff disadvantage. Our results reflect on current economic models of utility and have implications for organizational decision-making behavior.

JEL Classification: A13, C91, D81, M14

Suggested Citation

Brandts, Jordi and Charness, Gary, Truth or Consequences: An Experiment (October 2002). Univ. Pompeu Fabra, Economics and Business Working Paper No. 437, Available at SSRN: https://ssrn.com/abstract=224571 or http://dx.doi.org/10.2139/ssrn.224571

Jordi Brandts (Contact Author)

Instituto de Analisis Economico (CSIC) Barcelona ( email )

UAB Campus
E-08193 Bellaterra
Spain

Gary Charness

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States
805-893-2412 (Phone)
805-893-8830 (Fax)

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