Abstract: The paper employs laboratory experimentation to study the effect of competition on truth telling and trust in communication. A sequence of either competitive or cooperative interactions preceded an experimental communication game. In the game, informed advisors sent a recommendation to decision-makers who faced uncertainty about the consequences of their choice. While many advisors told the truth against their monetary self-interest, the propensity to tell the truth was unaffected by the contextual priming. In contrast, decision-makers trusted significantly less in a competitive context. The effect was strongest when they faced full uncertainty. The paper relates this result to psychological and neuro-economic findings on automatic information processing. The data of this study were largely in line with Subjective Equilibrium Analysis (Kalai and Lehrer, 1995)
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