Deception and price in a market with asymmetric information
In markets with asymmetric information, only sellers have knowledge about the quality of goods. Sellers may of course make a declaration of the quality, but unless there are sanctions imposed on false declarations or reputations are at stake, such declarations are tantamount to cheap talk. Nonethele...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Cambridge University Press
2007-02-01
|
| Series: | Judgment and Decision Making |
| Subjects: | |
| Online Access: | https://www.cambridge.org/core/product/identifier/S1930297500000243/type/journal_article |
| _version_ | 1797696015785000960 |
|---|---|
| author | Kimmo Eriksson Brent Simpson |
| author_facet | Kimmo Eriksson Brent Simpson |
| author_sort | Kimmo Eriksson |
| collection | DOAJ |
| description | In markets with asymmetric information, only sellers have knowledge about the quality of goods. Sellers may of course make a declaration of the quality, but unless there are sanctions imposed on false declarations or reputations are at stake, such declarations are tantamount to cheap talk. Nonetheless, in an experimental study we find that most people make honest declarations, which is in line with recent findings that lies damaging another party are costly in terms of the liar's utility. Moreover, we find in this experimental market that deceptive sellers offer lower prices than honest sellers, which could possibly be explained by the same wish to limit the damage to the other party. However, when the recipient of the offer is a social tie we find no evidence for lower prices of deceptive offers, which seems to indicate that the rationale for the lower price in deceptive offers to strangers is in fact profit-seeking (by making the deal more attractive) rather than moral. |
| first_indexed | 2024-03-12T03:20:28Z |
| format | Article |
| id | doaj.art-cc7ae165a78e4ede9360342d8ab98656 |
| institution | Directory Open Access Journal |
| issn | 1930-2975 |
| language | English |
| last_indexed | 2024-03-12T03:20:28Z |
| publishDate | 2007-02-01 |
| publisher | Cambridge University Press |
| record_format | Article |
| series | Judgment and Decision Making |
| spelling | doaj.art-cc7ae165a78e4ede9360342d8ab986562023-09-03T14:02:36ZengCambridge University PressJudgment and Decision Making1930-29752007-02-012232810.1017/S1930297500000243Deception and price in a market with asymmetric informationKimmo Eriksson0Brent Simpson1Department of Mathematics and Physics, Malardalen UniversityDepartment of Sociology, University of South CarolinaIn markets with asymmetric information, only sellers have knowledge about the quality of goods. Sellers may of course make a declaration of the quality, but unless there are sanctions imposed on false declarations or reputations are at stake, such declarations are tantamount to cheap talk. Nonetheless, in an experimental study we find that most people make honest declarations, which is in line with recent findings that lies damaging another party are costly in terms of the liar's utility. Moreover, we find in this experimental market that deceptive sellers offer lower prices than honest sellers, which could possibly be explained by the same wish to limit the damage to the other party. However, when the recipient of the offer is a social tie we find no evidence for lower prices of deceptive offers, which seems to indicate that the rationale for the lower price in deceptive offers to strangers is in fact profit-seeking (by making the deal more attractive) rather than moral.https://www.cambridge.org/core/product/identifier/S1930297500000243/type/journal_articlehonestydeceptionasymmetric informationprice signalingsocial ties |
| spellingShingle | Kimmo Eriksson Brent Simpson Deception and price in a market with asymmetric information Judgment and Decision Making honesty deception asymmetric information price signaling social ties |
| title | Deception and price in a market with asymmetric information |
| title_full | Deception and price in a market with asymmetric information |
| title_fullStr | Deception and price in a market with asymmetric information |
| title_full_unstemmed | Deception and price in a market with asymmetric information |
| title_short | Deception and price in a market with asymmetric information |
| title_sort | deception and price in a market with asymmetric information |
| topic | honesty deception asymmetric information price signaling social ties |
| url | https://www.cambridge.org/core/product/identifier/S1930297500000243/type/journal_article |
| work_keys_str_mv | AT kimmoeriksson deceptionandpriceinamarketwithasymmetricinformation AT brentsimpson deceptionandpriceinamarketwithasymmetricinformation |