Motivation
In real life, there is no such thing as the assumption complete information in decision making. Individuals are called to make decisions on cases where parties possess some private information and others not. Often people need to signal to others some of their private information, especially when the other party must take an action that affects their payoff. Game theory tries to illustrate these conditions with signaling theory. Often parties with conflicting interests face monetary incentives that make them to follow a misreporting strategy which leads to an advantageous outcome. Based on “homo-economicus” assumption, a lying strategy is used when is beneficial for an individual, regardless of its consequences to the other people.
Experimental evidence proves that in many cases people prefer to reveal their information rather than obtain the benefits deceiving the others, implying that individual face …show more content…
Using an Sender-Receiver game, he found that the cost-benefit analysis of misreporting is subjective and differs between people even if the actual monetary payoffs are the same. Furthermore, he concludes that people are sensitive on the consequences of their lies to other people. Lundquist et al. (2008) provide further evidence for lying aversion by stating that the tendency to misreporting is dependent on the size of the lie. Conducting a bargaining game with asymmetric information where “cheap talk” interaction was allowed, they found that people were more likely to lie when the size of lie was small. Fischbacher (2008) research provides a population distribution relative to their behavior towards transporting information. They found that 20% of a given population is homo-economicus, 39% resist in beneficial lies and remain honest and another 20% consist of “incomplete” liars in the sense that they do not revealing the truth but at the same time they do use the lie that maximize their
In real life, there is no such thing as the assumption complete information in decision making. Individuals are called to make decisions on cases where parties possess some private information and others not. Often people need to signal to others some of their private information, especially when the other party must take an action that affects their payoff. Game theory tries to illustrate these conditions with signaling theory. Often parties with conflicting interests face monetary incentives that make them to follow a misreporting strategy which leads to an advantageous outcome. Based on “homo-economicus” assumption, a lying strategy is used when is beneficial for an individual, regardless of its consequences to the other people.
Experimental evidence proves that in many cases people prefer to reveal their information rather than obtain the benefits deceiving the others, implying that individual face …show more content…
Using an Sender-Receiver game, he found that the cost-benefit analysis of misreporting is subjective and differs between people even if the actual monetary payoffs are the same. Furthermore, he concludes that people are sensitive on the consequences of their lies to other people. Lundquist et al. (2008) provide further evidence for lying aversion by stating that the tendency to misreporting is dependent on the size of the lie. Conducting a bargaining game with asymmetric information where “cheap talk” interaction was allowed, they found that people were more likely to lie when the size of lie was small. Fischbacher (2008) research provides a population distribution relative to their behavior towards transporting information. They found that 20% of a given population is homo-economicus, 39% resist in beneficial lies and remain honest and another 20% consist of “incomplete” liars in the sense that they do not revealing the truth but at the same time they do use the lie that maximize their