How private is private information? The ability to spot deception in an economic game

We provide experimental evidence on the ability to detect deceit in the 'Lemon Game': a buyer-seller game with asymmetric information. Sellers have private information about the value of a good and sometimes have incentives to mislead buyers. We examine if buyers can spot deception in face-to-face encounters. We vary whether buyers can interrogate the seller and the contextual richness. The buyers' prediction accuracy is above chance, and is substantial for confident buyers. There is no evidence that interrogation and contextual richness are important factors. These results show that the information asymmetry is partly eliminated by people's ability to spot deception.