Bard College Berlin News
Prof. Dr. Israel Waichman publishes research on"The efficacy of (self-)verification instruments in risky investments: An experiment'' in the Journal of Economic Behavior and Organization
To deal with information asymmetry, investors and firms currently rely on expensive verification processes. However, new technologies enable firms to share information at a much lower cost. Stenzel, Requate and Waichman employed a sender-receiver game to model risky investments, in which firms may misreport their type to an investor. They then experimentally test the effectiveness of (self-)verification instruments against a pure trust-based scenario. They find that firms deceive considerably less, and investors trust more than expected, even in the baseline treatment without (self-)verification. Investors’ expected payoffs are higher under self-verification than in the baseline. Yet, the availability of a low-cost self-verification technology does not fully eliminate the information asymmetry. These findings could be explained by models that consider intrinsic costs of lying and altruistic preferences.
Read the full article here.
Post Date: 11-24-2025