Why Lying Pays: Truth Bias in the Communication with Conflicting Interests

We conduct experiments of a cheap-talk game with incomplete information in which one sender type has an incentive to misrepresent her type. Although that Sender type mostly lies in the experiments, the Receiver tends to believe the Sender's messages. This confirms ``truth bias'' reported in communication theory in a one-shot, anonymous environment without nonverbal cues. These results cannot be explained by existing refinement theories, while a bounded rationality model explains them under certain conditions. We claim that the theory for the evolution of language should address why truthful communication survives in the environment in which lying succeeds.Cheap talk, Communication, Private information, Experiment, Equilibrium refinement, Bounded rationality, Truth bias

Lower Bounds on Implementing Robust and Resilient Mediators

We consider games that have (k,t)-robust equilibria when played with a mediator, where an equilibrium is (k,t)-robust if it tolerates deviations by coalitions of size up to k and deviations by up to $t$ players with unknown utilities. We prove lower bounds that match upper bounds on the ability to implement such mediators using cheap talk (that is, just allowing communication among the players). The bounds depend on (a) the relationship between k, t, and n, the total number of players in the system; (b) whether players know the exact utilities of other players; (c) whether there are broadcast channels or just point-to-point channels; (d) whether cryptography is available; and (e) whether the game has a $k+t)-punishment strategy; that is, a strategy that, if used by all but at most$k+t$ players, guarantees that every player gets a worse outcome than they do with the equilibrium strategy

Testing for Hypothetical Bias in Contingent Valuation Using a Latent Choice Multinomial Logit Model

The most persistently troubling empirical result in the contingent valuation method literature is the tendency for hypothetical willingness to pay to overestimate real willingness to pay. We suggest a new approach to test and correct for hypothetical bias using a latent choice multinomial logit (LCMNL) model. To develop this model, we extend Dempster, Laird, and Rubin’s (1977) work on the EM algorithm to the estimation of a multinomial logit model with missing information on categorical membership. Using data on both the quality of water in the Catawba River in North Carolina and the preservation of Saginaw wetlands in Michigan, we find two types of “yes” responders in both data sets. We suggest that one set of yes responses are yea-sayers who suffer from hypothetical bias and answer yes to the hypothetical question but would not pay the bid amount if it were real. The second group does not suffer from hypothetical bias and would pay the bid amount if it were real.C25, P230, Q51

Robust Evolution Of Contingent Cooperation In Pure One-Shot Prisoners' Dilemmas. Part I: Vulnerable Contingent Participators Versus Stable Contingent Cooperators

ROC curves from the signal detection literature are used in an evolutionary analysis of one-shot and repeated prisoners' dilemmas: showing if there is any discounting of future payoffs, or any cost of searching for an additional partner, then cooperative players who contingently participate - in terms of who to play with or when to exit - cannot survive when most other players unconditionally defect; even when contingent participators only interact with themselves by perfectly detecting their own type. However, quite different results hold for players who act contingently, not in terms of whether to play or exit, but rather in terms of how to act with any given partner. There is a form of contingent cooperation in one-shot prisoners' dilemmas (called CD behavior) that will robustly evolve through any payoff monotonic process, such as replicator dynamics. That is, whenever CD-players can detect their own type better than pure chance, they are guaranteed to evolve from any initial population - eventually to a unique evolutionarily stable population composed entirely of contingent cooperators - provided the fear payoff difference is less than the sum of greed and cooperation payoff differences. The adaptive capabilities just described hold for pure one-shot prisoners' dilemmas: meaning no repeated interactions or pairings in any generation are involved; no information or third party reports about past behavior are involved, all signal information arises only from symptoms detected after two strangers meet for the first time; and no subjective preferences for altruism, fairness, equity, reciprocity, or morality affect the raw evolutionary dynamics. Testable predictions are also derived that agree with a large body of experimental data built up since the prisoners dilemma was first introduced in 1950. They describe how the CD-players' equilibrium probability of cooperating changes: depending on the relative size of fear, greed, and cooperation payoff differences; and depending on the players' history of communication, especially when face-to-face discussion is involved. --prisoners? dilemma,cooperation,Nash equilibrium,evolutionary stability,replicator dynamics,signal detection,ROC curves,experiment

Corporate and Consumer Social Responsibilities: Label Regulations in the Lab

Although consumer attitudes toward corporate social responsibility are positive, socially responsible (SR) products are far from gaining significant market shares. Information asymmetries have been identified as one of the factor contributing to this attitude-behaviour gap, because social responsibility is a credence attribute. Signalling may remedy this market failure. We use an experimental posted offer market to investigate the impact of various regulatory requirements for labels on sellers’ choice to supply SR products and to signal it, and on buyers’ choice of ethical quality. Three treatments are tested: label certification by a third-party, “cheap-talk signalling” with random monitoring and with or without reputations. Individual social preferences are elicited prior to the game, and their distribution generates a positive supply of and demand for social responsibility. When there is third-party certification or cheap-talk signalling with random monitoring and reputations, a separating equilibrium emerges, whereby labelled and non-labelled goods are exchanged at different prices. However, efficiency gains are significant only for third-party certification. Cheap-talk signalling with random monitoring but without reputations does not yield efficiency gains. Moreover, it generates a “halo” effect, whereby buyers are misguided by sellers’ claims about product quality. Finally, individual social preferences have a significant effect on players’ decisions. Only third-party certification can increase companies’ social responsibility and can allow consumers to express their social preferences through consumption.labels, social responsibility, social preferences, separating equilibrium, market game, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Marketing, C92, D82, L15, M14,