Deception Under the Veil of Noise

• Authors: Jawwad Noor and Fernando Payró Chew
• BSE Working Paper: 1544 | December 25
• Keywords: belief biases , deception , optimal stopping , endogenous information
• JEL codes: D01, D9

We study a dynamic predator–prey game in which a predator can conceal its movement under naturally occurring environmental noise. In the safe state, forest noise is i.i.d., whereas in the dangerous state the predator contributes additional noise as it approaches the prey. The prey updates her beliefs about danger from the realized noise sequence and chooses whether to remain vigilant. We characterize equilibrium patterns of noise generated in the forest and show that a marker for deception is a hot-hand effect, whereby streaks persist with increasing probability.