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

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
December 24, 2018, 4:28 AM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
September 06, 2019, 11:44 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

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

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Intervention

Is the intervention completed?
No
Data Collection Complete
No
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials