Lying and Friendship

The goal of this paper is to investigate the interaction between social ties and deceptive behavior within an experimental setting. To do so, we implement a modified sender-receiver game in which a sender obtains a private signal regarding the value of a state variable and sends a message related to the value of this state variable to the receiver. The sender is allowed to be truthful or to lie about what he has seen. The innovation in our experimental design lies in the fact that, in contrast to the extant sender-receiver games, the receiver can take no action – which eliminates strategic deception. A further innovation lies in the fact that subjects (i.e., senders) are not restricted to choose between truth telling and a unique type of lie but, instead, are allowed to choose from a distinct set of allocations that embodies a multi-dimensional set of potential lies. Our experimental design is, therefore, able to overcome an existing identification problem by allowing us to disentangle lying aversion from social preferences. We implement two treatments: one in which players are anonymous to each other (strangers); and one in which players know each other from outside the experimental laboratory (friends). We find that individuals are less likely to lie to friends than to strangers; that they have different degrees of lying aversion and that they lie according to their social preferences. Pro-social individuals appear to be more lying averse. If they lie, however, they are equally likely to do so with friends and strangers. The deceptive behavior of selfish individuals mimics those of pro social types only when subjects play with friends. Overall, in addition to social preferences, friendship appears to be an important factor in improving our understanding of deceptive behavior. ∗Chakravarty and Ma: Department of Consumer Sciences, Purdue University, West Lafayette, IN 47907, US. Maximiano: Department of Economics, Krannert School of Management, Purdue University, West Lafayette, IN 47907, US. Corresponding author: Sandra Maximiano, Purdue University, Krannert School of Management, room 523. 403 West State Street. IN 47907-2056. Phone: 765-496-8049. Email:[email protected] We thank Timothy Cason and the seminar participants in the experimental Brown Bag seminar at Purdue, and the seminar participants at ESA meetings in Copenhagen, 2010, at the university of Amsterdam, at the University of Rotterdam for their helpful comments and suggestions.