Xueheng Li

Lying and naivety in multi-player cheap talk (with Daniele Nosenzo)

Abstract:  A large body of economic and psychological experiments show that, when communicating with others, many individuals (1) have lying aversion and (2) are naive about the messages they receive such that they interpret messages literally. We study theoretically and experimentally how lying aversion and naivety affect cheap-talk communications among multiple players with partially aligned interests. In particular, we examine how a sender’s communication to a receiver depends on the communications of other senders to the receiver. First, we show theoretically that, while the standard model (assuming Bayesian material-payoff maximizers) predicts substitutability in truth-telling across senders, lying aversion leads to an opposite complementarity effect. Moreover, since naive players listen to babbling messages, the biases of those who send babbling messages affect the messages of other senders; in the standard model, in contrast, the exact biases of those who send babbling messages do not matter. We then design an experiment to investigate empirically whether the effects of lying aversion and naivety are in line with our theory.