Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279155 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10406
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We modify the Acquiring-a-Company game to study lying in ultimatum bargaining. Privately informed sellers send messages about the alleged value of their company to potential buyers. Via random information leaks, buyers can learn the true value before proposing a price which the seller finally accepts or not. Two-thirds of all sellers exaggerate the company's value to persuade buyers to offer more, especially when the true value is small. Surprisingly, a higher leak probability does not increase truthtelling. However, it decreases overreporting and increases underreporting. Buyers who found out value misreporting anchor their price proposals on the true value but do not explicitly discriminate against liars. Sellers are fully opportunistic and make their acceptances dependent on the resulting positive payoff. Even if morality concerns do not seem to matter much, probabilistic leaks enhance welfare. That suggests to politically facilitate and encourage e.g. whistle blowing.
Subjects: 
acquiring-a-company experiments
information leaks
cheap talk (not) lying
ultimatum bargaining
JEL: 
C78
C91
D83
D91
Document Type: 
Working Paper
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