Truth and Lie Detection in Bluffing

Beliefs in signals that reveal lies and truths are widespread. It is shown that such beliefs may be exploited strategically in signaling games of pure conflict of interest. Truth and lie detection is modeled by signals perceived by the receiver that are emitted with a probability contingent on the truth value of the sender's message. Truth or lie detection of this kind always shrinks the equilibrium set and if the probability for the truth or lie signal is sufficiently large the resulting equilibrium is unique. These results are robust to asymmetries regarding prior probabilities and payoffs.

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