Truth, trust, and sanctions: On institutional selection in sender-receiver games

R.J.A.P. Peeters*, M. Vorsatz, M. Walzl

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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We have conducted a laboratory experiment to investigate the impact of institutions and institutional choice on truth-telling and trust in senderreceiver games. We find that in an institution with sanctioning opportunities, receivers sanction predominantly after having trusted lies. Individuals who sanction are responsible for truth-telling beyond standard equilibrium predictions, and they are more likely to choose the sanctioning institution. Sanctioning and non-sanctioning institutions coexist if their choice is endogenous, and the former shows a higher level of truth-telling but lower material payoffs. Our experimental findings are consistent with logit agent quantal response equilibrium with two distinct groups of individuals: one consisting of subjects who experience non-monetary lying costs as senders and non-monetary costs when being lied to as receivers, and the other consisting of payoff maximizers.
Original languageEnglish
Pages (from-to)508-548
JournalScandinavian Journal of Economics
Issue number2
Publication statusPublished - 1 Jan 2013

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