Unethical behavior such as dishonesty, cheating and corruption occurs frequently in organizations or groups.Recent experimental evidence suggests that there is a stronger inclination to behave immorally in groups than individually. We ask if this is the case, and if so, why. Using a parsimonious laboratory setup, we study how individual behavior changes when deciding as a group member. We observe a strong dishonesty shift. This shift is mainly driven by communication within groups and turns out to be independent of whether group members face payoff commonality or not (i.e. whether other group members benefit from one's lie). Group members come up with and exchange more arguments for being dishonest than for complying with the norm of honesty.Thereby, group membership shifts the perception of the validity of the honesty norm and of its distribution in the population. IntroductionGroups and organizations sometimes fail to comply with a moral norm. They lie, they cheat, they are dishonest, they are corrupt, and they commit fraud. However, it is not organizations that take those decisions; it is individuals that are part of the organization. Can we thus explain undesired behavior in organizations simply by aggregating individual failures to comply with the norm? Or, are there other elements inherent to the organization or to its structure that can help us better understand how undesired behavior emerges? And, how does undesired behavior of individuals differ from behavior within or by an entire organization? While these are relevant questions, surprisingly little empirical evidence exists (Conrads et al., 2013; Sutter, 2009). This paper addresses these questions in a parsimonious setup that allows us to identify some of the potential reasons for collective failure to follow a moral norm or to comply with desired behavior. This study provides a twofold contribution. First, we implement a parsimonious laboratory setup to investigate whether groups (as our proxy for small organizations) are indeed more inclined to engage in dishonest or unethical behaviors than individuals, as casual observation and some previous results in the literature suggest (e.g., Chytilova and Korbel, 2014; Conrads et al., 2013; Gino et al., 2013; Muehlheusser et al., 2015; Sutter, 2009; Weisel and Shalvi, 2015). We find that the answer is affirmative. Individuals lie less frequently when deciding alone as compared to groups. Second, we offer and disentangle explanations for this "dishonesty shift". There are several candidate explanations: (i) a simple aggregation of individual inclinations as a consequence of aggregation rules (i.e. decision making procedures) within the group; (ii) the incentive structure inherent to many group decisions (oftentimes, all members share group payoffs equally and an individual deviation from either of the strategies -behaving dishonest or honest -can sometimes reduce payoffs for everyone dramatically); (iii) the decreased observability of one's actions within a group, potentially making the individual...

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Unethical behavior such as dishonesty, cheating and corruption occurs frequently in organizations or groups. Recent experimental evidence suggests that there is a stronger inclination to behave immorally in groups than individually. We ask if this is the case, and if so, why. Using a parsimonious laboratory setup, we study how individual behavior changes when deciding as a group member. We observe a strong dishonesty shift. This shift is mainly driven by communication within groups and turns out to be independent of whether group members face payoff commonality or not (i.e. whether other group members benefit from one's lie). Group members come up with and exchange more arguments for being dishonest than for complying with the norm of honesty. Thereby, group membership shifts the perception of the validity of the honesty norm and of its distribution in the population.

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