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Screening Ethics when Honest Agents Keep their Word

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Author Info

  • Ingela Alger

    ()

  • Régis Renault

    ()

Abstract

We study the implications of honesty when it requires pre-commitment. Within a two-period hidden information problem, an agent learns his match with the assigned task in period 2 and, if honest, reveals it to the principal if he has committed to it. The principal may offer a menu of contracts to screen ethics. Both honest and dishonest agents are willing to misrepresent their ethics. The principal and dishonest agents benefit from an increased likelihood of honesty as long as honesty is likely enough. Honest agents always profit from ethics uncertainty if a good match is likely. This is also true if dishonesty is likely enough, in which case an honest receives the same surplus as a dishonest.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s00199-005-0057-3
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 30 (2007)
Issue (Month): 2 (February)
Pages: 291-311

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Handle: RePEc:spr:joecth:v:30:y:2007:i:2:p:291-311

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Related research

Keywords: Ethics; Honesty; Loyalty; Adverse selection; Screening; D82;

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References

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  1. Alger, Ingela & Albert Ma, Ching-to, 2003. "Moral hazard, insurance, and some collusion," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 225-247, February.
  2. Daniel Nagin & James Rebitzer & Seth Sanders & Lowell Taylor, 2002. "Monitoring, Motivation and Management: The Determinants of Opportunistic Behavior in a Field Experiment," NBER Working Papers 8811, National Bureau of Economic Research, Inc.
  3. Green, Jerry R & Laffont, Jean-Jacques, 1986. "Partially Verifiable Information and Mechanism Design," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 447-56, July.
  4. F. Forges & Frederic Koessler, 2003. "Communication Equilibria with Partially Verifiable Types," THEMA Working Papers 2003-10, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  5. Picard, Pierre, 1996. "Auditing claims in the insurance market with fraud: The credibility issue," Journal of Public Economics, Elsevier, vol. 63(1), pages 27-56, December.
  6. Kofman, Fred & Lawarree, Jacques, 1996. "On the optimality of allowing collusion," Journal of Public Economics, Elsevier, vol. 61(3), pages 383-407, September.
  7. Ingela Alger & Regis Renault, 2000. "Screening Ethics when Honest Agents Care about Fairness," Boston College Working Papers in Economics 489, Boston College Department of Economics, revised 09 Nov 2004.
  8. Deneckere,R. & Severinov,S., 2001. "Mechanism design and communication costs," Working papers 23, Wisconsin Madison - Social Systems.
  9. Jaffee, Dwight M & Russell, Thomas, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 651-66, November.
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Citations

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Cited by:
  1. Huang Fali & Peter Cappelli, 2006. "Employee Screening: Theory and Evidence," Working Papers 11-2006, Singapore Management University, School of Economics.
  2. Ingela Alger & Ching-to Albert Ma & Regis Renault, 2009. "Experience Benefits and Firm Organization," Carleton Economic Papers 09-03, Carleton University, Department of Economics.
  3. Ingela Alger & Régis Renault, 2006. "Screening Ethics When Honest Agents Care About Fairness ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 59-85, 02.
  4. Saran, Rene, 2011. "Bilateral trading with naive traders," Games and Economic Behavior, Elsevier, vol. 72(2), pages 544-557, June.
  5. Demichelis, Stefano & Weibull, Jörgen, 2006. "Efficiency, communication and honesty," Working Paper Series in Economics and Finance 645, Stockholm School of Economics, revised 28 Nov 2006.
  6. Conley, John P. & Neilson, William, 2009. "Endogenous games and equilibrium adoption of social norms and ethical constraints," Games and Economic Behavior, Elsevier, vol. 66(2), pages 761-774, July.
  7. Stefano Demichelis & Jörgen W. Weibull, 2007. "Language, meaning and games: a model of communication, coordination and evolution," Carlo Alberto Notebooks 61, Collegio Carlo Alberto.
  8. Liu, Ting, 2006. "Credence Goods Markets with Conscientious and Selfish Experts," MPRA Paper 1107, University Library of Munich, Germany, revised 10 Sep 0007.
  9. Santiago Sánchez-Pagés & Marc Vorsatz, 2009. "Enjoy the silence: an experiment on truth-telling," Experimental Economics, Springer, vol. 12(2), pages 220-241, June.
  10. Schmitz, Patrick W., 2007. "Optimal selling strategies when buyers may have hard information," European Economic Review, Elsevier, vol. 51(4), pages 859-870, May.

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