Telling the truth is an option that many people or organisations will take as a way of deceiving another party with whom they are negotiating or competing. That is the central finding of new experimental research by Professor Matthias Sutter, published in the January 2009 issue of the Economic Journal.

Circumstances in which there are differences in the information available to interested parties – what economists call ''informational asymmetries'' – abound in economic decision-making, and they often provide an incentive for deception through telling a lie.

Sutter''s laboratory study – in which the sender of a message can either lie or tell the truth about the benefits of two options for the message receiver – shows that telling the truth is also very often an attempt at deceiving the other party. Telling the truth happens in around 40% of cases of intended deception.

The research also finds that the frequency of deception through blunt lies or sophisticated truth-telling depends significantly on the gains for the sender. The higher the gains from deception for the sender, the more likely it is that there will be attempted deception. Hence, lying is a matter of consequences: when the gain is €10 instead of €1, the frequency of deception increases by about 20 percentage points.

Many real-life situations are characterised by informational asymmetries, and there may well be incentives for interested parties to exploit them. Think of opposing sides in a war when one party pretends to invade the other''s territory at a different location than where the attack is actually carried out. Think of managers concealing how to restructure or downsize a company that will be taken over. Or think of elections where spreading false facts about the opposition or hiding one''s own plans may gain votes.

Until now, a unifying assumption of research on ''strategic information transmission'' has been that deception means lying. According to this standard view, telling the truth cannot be considered as an attempt to deceive others. But should it?

Sutter''s study uses a laboratory experiment involving pairs of senders and receivers. Only the sender is informed about the monetary consequences of two options, A and B. The sender''s only choice in the game is to send either Message A (''Option A will earn you more money than Option B'') or Message B (''Option B will earn you more money than Option A'').

Having received the message, the receiver has to pick one of the options, which is then implemented for payment. The receiver is then informed

about (and paid) only the monetary payoff for the chosen option, not the payoff for the other option, nor the sender''s payoff for either of the options. Hence, the receiver cannot judge whether the sender has told the truth or not.

In the experiment, Option A always yields a higher payoff for the receiver, whereas Option B is the more profitable option for the sender.

The experimental data show that about 50% of senders who send Message A actually expect the receiver not to believe them and thus to implement the other option. Hence, these senders want to deceive the receiver by telling the truth.

The main experiment involves individuals as senders and receivers, but a control experiment puts teams in the roles of sender and receiver. The results of the team experiment show clearly that sophisticated deception through telling the truth is at the heart of the action.

Team members who send the objectively correct Message A want to deceive the receiver team in about 90% of cases. Analysing the contents of the team discussion – which were taped – provides strong evidence for the prevalence of deception through telling the truth.

Professor Sutter concludes:

''My findings show that deception through telling the truth is a realistic option to which decision-makers may resort in many important real-life situations in politics, sports or economics.''

''Given this insight, it becomes even more complicated to interpret
messages in real life correctly – even true ones.''

''Deception through Telling the Truth?! Experimental Evidence from Individuals and Teams'' by Matthias Sutter is published in the January 2009 issue of the Economic Journal.