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The role of verifiability and privacy in the strategic provision of performance feedback: Theory and experimental evidence

Ertac, S; Koçkesen, L; Ozdemir, D; (2016) The role of verifiability and privacy in the strategic provision of performance feedback: Theory and experimental evidence. Games and Economic Behavior , 100 pp. 24-45. 10.1016/j.geb.2016.08.009. Green open access

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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.

Type: Article
Title: The role of verifiability and privacy in the strategic provision of performance feedback: Theory and experimental evidence
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.geb.2016.08.009
Publisher version: http://dx.doi.org/10.1016/j.geb.2016.08.009
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Lab experiments, Performance feedback, Strategic communication, Cheap talk, Disclosure, Persuasion, Multiple audiences, Lying
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10123869
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