Deception and Reception: The Behavior of Information Providers and Users Report as inadecuate




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Abstract

We investigate the behavior of information providers underwriters and users investors in a controlled laboratory experiment where underwriters have incentives to deceive and investors have incentives to avoid deception. Participants play simultaneously as underwriters and investors in one-shot information transmission games. The results of our experiment show a significant proportion of both deceptive and non-deceptive underwriters. Despite the presence of deceptive underwriters, investors are receptive to underwriters’ reports, gleaning information content, albeit overly optimistic. Within our sample, deception by underwriters and reception by investors are the most profitable strategies. Moreover, participants who send deceptive reports to investors, but at the same time are receptive to reports of underwriters, earn the highest payoffs. These results call into question the characterization of duped investors being irrational.



Item Type: MPRA Paper -

Original Title: Deception and Reception: The Behavior of Information Providers and Users-

Language: English-

Keywords: experiment, strategic communication, risk, deception, investment advice-

Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative GamesC - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior-





Author: Sheremeta, Roman

Source: https://mpra.ub.uni-muenchen.de/77733/







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