Is there a link between endowment inequality and deception? – an analysis of students and chess players

Abstract

This paper investigates experimentally the relationship between inequality in endowment and deception. Our basic design is adopted from Gneezy (2005): two players interact in a deception game. It is common knowledge that player 1 has private information about the payoffs for both players of two alternative actions. Player 1 sends a message to player 2, indicating which alternative putatively will end up in a higher payoff for player 2. The message, which can either be true or false, does not affect the payoffs of the players. Player 2 has no information about the payoffs. However, player 2 selects one of the two alternatives A or B, which is payoff-relevant for both players. Our paper adds value to the literature by extending Gneezy (2005) in two ways. First, we systematically vary the initial endowment of players 1 and 2 (common knowledge to both of them). Second, we do not limit ourselves to the standard population of university students but also recruit chess players that are not enrolled in any degree program. Doing so, we want to find out if our results remain robust over a non-standard subject population which is known to be experienced to some extent in strategic interactions. Our main findings are: (i) non-students behave more honestly than students, (ii) students are more likely to trust the opponent’s message, and (iii) students and non-students behave differently to variation in initial endowment.