Research Seminar in Economics: Eugene Jeong - Uncertainty Paradox: Why You Should (Not) Lie

It covers empirical as well as theoretical contributions across all fields of economics. The Research Seminar in Economics is usually held weekly during the academic term.

Speaker

Dr Seungwon (Eugene) Jeong (Lecturer in Economics, University of Bristol)

Abstract

During the COVID-19 pandemic, unreliable statistics are a growing concern. The government may want to underreport, and cure sellers may want to overreport the number of cases.

We introduce an Uncertainty Paradox: seemingly profitable misreporting can be unprofitable when misreporting leads to uncertainty. We relax both the correct belief and common belief assumptions, and first show that the seller should prefer no uncertainty in auctions.

However, the government - who runs the pandemic procurement that allocates stimulus-packages among companies affected by the pandemic - may prefer uncertainty. The incentive to misreport increases with the pandemic impact, and in the limit, uncertainty “disappears.”