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The Market for Lemons and Liars
Last registered on September 06, 2019

Pre-Trial

Trial Information
General Information
Title
The Market for Lemons and Liars
RCT ID
AEARCTR-0003598
Initial registration date
December 18, 2018
Last updated
September 06, 2019 11:44 AM EDT
Location(s)
Primary Investigator
Affiliation
University of Pittsburgh
Other Primary Investigator(s)
PI Affiliation
Nanjing Audit University
Additional Trial Information
Status
Completed
Start date
2019-04-08
End date
2019-04-30
Secondary IDs
Abstract
In this study we investigate the existence of an adverse selection of liars in the labor market. We then explore its consequences on the effectiveness of voluntary truth-telling as a solution for the problem of adverse selection in a lemons market. To do so, we design an experiment where individuals choose whether to sell a product in a cheap-talk market in which they can send an arbitrary message to the buyer, or in a verifiable-message market where they can only send truthful but possibly vague messages (Selection treatment). We then compare this treatment with one where the sellers are randomly allocated between the two markets (Random treatment). Using theoretical analysis we predict that the proportion of honest sellers in the cheap-talk market in the Selection treatment is lower than that in the Random treatment. Second, there are fewer trades in the Selection treatment than in the Random treatment, implying more inefficiencies in the Selection treatment.

External Link(s)
Registration Citation
Citation
Burdea, Valeria and Xueheng Li. 2019. "The Market for Lemons and Liars." AEA RCT Registry. September 06. https://doi.org/10.1257/rct.3598-2.0.
Former Citation
Burdea, Valeria and Xueheng Li. 2019. "The Market for Lemons and Liars." AEA RCT Registry. September 06. https://www.socialscienceregistry.org/trials/3598/history/52924.
Experimental Details
Interventions
Intervention(s)
Intervention Start Date
2019-04-08
Intervention End Date
2019-04-30
Primary Outcomes
Primary Outcomes (end points)
The primary study endpoint is the proportion of lying averse individuals across the Selection and Random treatments.
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
The secondary study endpoint is the frequency of trade across the Selection and Random treatments.
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
This is a randomized control trial. The experiment involves two conditions: Selection (treatment) and Random (control). Each condition consists of two parts. In part 1 we measure each participant’s lying preference using the Gneezy’s (2005) lying task. In part 2, players are randomly assigned to groups of 3: one is the seller, one buyer A and one buyer B. Buyer A represents buyers in the cheap-talk market while buyer B those in the verifiable-message market. Then, the seller and one of the buyers play a market game based on Forsythe et al. (1999). In the Selection condition, the seller chooses which buyer, A or B, to play with, whereas in the Random condition, the seller is randomly matched with a buyer. This is repeated 20 times.
Experimental Design Details
Randomization Method
Randomization done in office by a computer.
Randomization Unit
The unit of randomization is the individual.
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
360 university students
Sample size: planned number of observations
360 university students
Sample size (or number of clusters) by treatment arms
180 participants per treatment (60 sellers, each matched with one buyer A and one buyer B)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
University of Pittsburgh
IRB Approval Date
2018-12-12
IRB Approval Number
N/A
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
No
Is data collection complete?
No
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers