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The Role of Verifiability and Privacy in the Strategic Provision of Performance Feedback: Theory and Experimental Evidence

Ertac, Seda and Koçkesen, Levent and Ozdemir, Duygu (2016) 'The Role of Verifiability and Privacy in the Strategic Provision of Performance Feedback: Theory and Experimental Evidence.' Games and Economic Behavior. ISSN 0899-8256

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Abstract

We theoretically and experimentally analyze the role of verifiability and privacy in strategic performance feedback using a “one principal-two agent” context with real effort. We confirm the theoretical prediction that information transmission occurs only in verifiable feedback mechanisms and private-verifiable feedback is the most informative mechanism. Yet, subjects also exhibit some behavior that cannot be explained by our baseline model, such as telling the truth even when this will definitely hurt them, interpreting “no feedback” more optimistically than they should, and being influenced by feedback given to the other agent. We show that a model with individual-specific lying costs and naive agents can account for some, but not all, of these findings. We conclude that although agents do take into account the principal's strategic behavior to form beliefs in a Bayesian fashion, they are overly optimistic and interpret positive feedback to the other agent more pessimistically than they should.

Item Type: Article
Uncontrolled Keywords: Lab experiments; Performance feedback; Strategic communication; Cheap talk; Disclosure; Persuasion; Multiple audiences; Lying
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Institute for Social and Economic Research
Depositing User: Jim Jamieson
Date Deposited: 23 Sep 2016 14:50
Last Modified: 21 Mar 2018 02:00
URI: http://repository.essex.ac.uk/id/eprint/17640

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