ICES Experimental Economics Brown Bag Lecture
Trust but Verify? Experimental Evidence on Disclosure, Deception and Punishment in the Data Economy
Thursday, October 23, 2025 12:00 PM to 1:00 PM EDT
Vernon Smith Hall (formerly Metropolitan Building), Room 5075
The Interdisciplinary Center for Economic Science (ICES) presents an ICES Brown Bag Lecture featuring:
Antonin Scalia Law School at George Mason University
Trust but Verify? Experimental Evidence on Disclosure, Deception and Punishment in the Data Economy
Abstract
We use laboratory experiments to examine strategic disclosure and deception in a sender–receiver game modeling the data economy. Firms (senders) are privately informed of their quality and decide how to disclose it to consumers (receivers). They may signal higher quality through exaggeration, but face penalties if misrepresentation is detected. First, we vary the penalty for exaggeration and find that exaggeration declines with stronger penalties. We then compare two verification regimes: exogenous detection, which mimics probabilistic data breaches, and endogenous detection, in which receivers incur a cost to verify the firm’s claim, mimicking privacy audits. Contrary to equilibrium predictions, exaggeration is more prevalent under exogenous detection than under endogenous detection. This is driven by the finding that some receivers function as watchdogs and have a strong desire to detect regardless of detection cost.
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