The indirect effect of monetary incentives on deception

This paper investigates whether working under competitive or cooperative incentives affects deception in a subsequent, unrelated task. I use a laboratory study with two stages. First, participants work under a piece rate, tournament or team incentive in a real effort task. The second part consists of a sender-receiver game where the sender can gain financially at the expense of the receiver by sending a deceptive message. I find that senders who worked under tournament incentives are less honest than those who worked under a piece rate. I find no increase in honesty for those who performed under team incentives relative to the piece rate. Interestingly, this only holds when participants are not informed about their relative performance during the work task. When such feedback is provided I find that relative performance affects honesty across all incentive conditions. In particular, honesty decreases as relative performance differences become small.