Competition and Team Incentives to Lie : A Theoretical and Experimental Study

This study presents a theoretical and experimental investigation into the effects of competition and team incentives on dishonest behavior. We develop a singleagent decision model that incorporates loss aversion and a lying cost to examine the impact of these incentives. Our theoretical analysis reveals the diminishing marginal impacts of competition and team incentives on promoting dishonesty in the sense that the effect of the coexistence of team and competition is smaller than the combined effect of pure competition and pure team incentives. To test these theoretical predictions, we develop a new experimental framework based on a double-die rolling game, which provides a handy tool for studying dishonest behavior across various environments and investigating underlying factors that influence dishonesty. Unlike traditional single-die or coin-tossing games, our game generates a long-tailed distribution of honest reports, which enables us to more accurately and effectively identify liars and measure the size of lies. Our experimental findings are consistent with the predictions of our theoretical model