Evidence Games: Lying Aversion and Commitment∗ Elif B. Osun† Erkut Y. Ozbay‡ June 18, 2021 Abstract In this paper, we experimentally investigate whether commitment is necessary to obtain the optimal mechanism design outcome in an evidence game. Contrary to the theoretical equivalence of the outcome of the optimal mechanism outcome and the game equilibrium in evidence games, our results indicate that commitment has value. We also theoretically show that our experimental results are explained by accounting for lying averse agents. (JEL: C72, D82, C90) ∗We thank Emel Filiz-Ozbay, Navin Kartik and Barton Lipman for their helpful comments. †Department of Economics, University of Maryland, Email:
[email protected] ‡Department of Economics, University of Maryland, Email:
[email protected] 1 Introduction Consider an agent who is asked to submit a self-evaluation for an ongoing project, and a principal who decides on the agent’s reward. If the agent conducted his part as planned, he does not have any evidence to report at this point. But if he made a mistake which can’t be traced back to him unless he discloses it, he may choose to show his mistake or act as if he has no evidence.1 The agent wants to have a reward as high as possible independent of his evidence but the principal wants to set the reward as appropriate as possible. Does it matter whether the principal commits to a reward policy and then the agent decides whether to reveal the evidence or not, or the principal moves second after observing the agent’s decision? In voluntary disclosure literature, the case where principal moves first and commits to a reward policy corresponds to mechanism setup and the optimal mechanism has been studied (see e.g.