In vino veritas? Communication under the influence—An experimental study

Abstract

We report results from controlled laboratory experiments designed to investigate the effects of drinking alcohol on communication and transactions. In a game played in laboratory experiments, sellers who are privately informed about their asset’s quality communicate and trade with potential buyers after both parties drink their given alcoholic beverages. We investigated the effects of alcohol consumption by varying the alcohol content of the assigned beverages across treatments. Our main findings are as follows. First, sellers with a drink of a high alcohol content lie significantly more often than those with a drink of a low alcohol content. Second, upon receiving a “High” message, buyers with a drink of a high alcohol content make higher offers for assets than those with a drink of a low alcohol content. Third, the public availability of information on alcohol content does not change players’ behavior significantly. These findings are qualitatively consistent with the model of communication with a lying cost and naive receivers, suggesting that alcohol consumption lowers both the lying cost and the receiver’s sophistication when interpreting messages, although we cannot completely rule out the possibility that the observed effect is due to something other than alcohol intoxication.