Deception and reputation – An experimental test of reporting systems

Abstract

We use a repeated sender-receiver game in which sender behavior is revealed to future counterparts either by (i) standardized computer reports or (ii) individual reports composed by the receivers. Compared to our baseline, both reporting systems significantly decrease the rate of deceptive messages chosen by senders. However, we find that computer reports reduce deception to a higher extent than individually written reports. This comparably higher impact can be explained by the senders' anticipation of a high number of missing or deficient receiver reports that we find. We conclude that the precision of a reporting system has a higher importance for reducing deception than its personal character via individual feedback. Surprisingly, the reliability of computer reports is not correctly anticipated by receivers, who trust individually written reports more in the beginning and hence seem to back the wrong horse initially.

Collaborative Settings Increase Dishonesty

“…One possible reason for this is that Weisel and Shalvi (2015) overestimated the size of the effect because the sizes of effects tend to be greater in pioneering studies that are the first to report them (Wouda et al, 2017). Another possible reason is that the participants' concerns about their reputation in our study discouraged their dishonest behavior to a certain extent (Koch and Schmidt, 2010;Kimbrough and Rubin, 2015;Behnk et al, 2019).…”

How Leaders Influence (un)Ethical Behaviors Within Organizations: A Laboratory Experiment on Reporting Choices

“…1 Real-world settings where leaders and workers choose how to report earnings-as in our experiment-include firms with multiple profit centers, e.g., multidivisional companies where reporting 2 Feltovich (2019) finds lower reported costs in the "self-roll" treatment vis-à-vis the "computer-roll" treatment. Behnk et al (2019) show that computer-generated reports reduce deception to a stronger extent than individually-written reports in a repeated sender-receiver game. Evidence from tax compliance (Adhikari et al, 2021;Kleven et al, 2011) and firms' environmental emissions (Telle, 2013) further confirms that third-party reporting methods ensure lower levels of misreported information.…”

“…Opting for automatic reporting-instead of self-reporting-represents the ethical decision. This directly follows from experimental evidence that self-reporting attracts dishonest people as it allows hiding truthful information and cheating for private profits (Behnk et al, 2019;Feltovich, 2019). Our design is similar to Feltovich (2019) wherein subjects-who play the role of price-setting firms in a competition game-can choose how to report their costs: by either die rolls made by the subject who inputs the outcome into the computer ("selfroll" treatment) or computer-simulated die rolls ("computerroll" treatment).…”

“…For this purpose, a common practice is to adopt a reporting method based on self-disclosed information that prevents verification from external parties (Crocker & Slemrod, 2007;Feltovich, 2019). The opposite case is to report information certified by a neutral third party, which makes an objective assessment with no room for manipulation (Behnk et al, 2019).…”

“…2 While prior research has considered the mere action of cheating as a proxy for unethical behavior (Abeler et al, 2019;Rosenbaum et al, 2014), our study speaks to a broader class of misbehaviors encompassing the action of hiding relevant information through reporting choices. Exploring the choice of reporting methods is crucial to understand the natural occurrence of fraudulent behaviors, as the probability of detecting fraud is largely endogenous to how a given outcome is reported (Behnk et al, 2019;Feltovich, 2019;Kleven et al, 2011). Our study analyzes this aspect by exploring in a lab context the influence of leaders in shaping workers' ethical behaviors through reporting choices.…”