It is commonly said that children do not distinguish between pretence and reality, but I see very little reason to believe this. We do not believe that Hamlet ever existed, but we should be annoyed by a man who kept reminding us of this while we were enjoying the play. So children are annoyed by a tactless reminder of reality, but are not in the least taken in by their own make-believe.
Source: On Education, especially in early childhood, 1926, Pt. 2： Education of character, chap. 5: Play and fancy
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