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Are You Paying Your Employees to Cheat? An Experimental Investigation

Author

Listed:
  • Cadsby C. Bram

    () (University of Guelph)

  • Song Fei

    () (Ryerson University)

  • Tapon Francis

    () (University of Guelph)

Abstract

We compare, through a laboratory experiment using salient financial incentives, misrepresentations of performance under target-based compensation with those under both a linear piece-rate and a tournament-based bonus system. An anagram game was employed as the experimental task. Results show that productivity was similar and statistically indistinguishable under the three schemes. In contrast, whether one considers the number of overclaimed words, the number of work/pay periods in which overclaims occur, or the number of participants making an overclaim at least once, target-based compensation produced significantly more cheating than either of the other two systems. While earlier research has compared cheating under target-based compensation with cheating under non-performance-based compensation, which offers no financial incentive to cheat, this is the first study that compares cheating under target-based schemes to cheating under other performance-based schemes. The results suggest that cheating as a response to incentives can be mitigated without giving up performance pay altogether.

Suggested Citation

  • Cadsby C. Bram & Song Fei & Tapon Francis, 2010. "Are You Paying Your Employees to Cheat? An Experimental Investigation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-32, April.
  • Handle: RePEc:bpj:bejeap:v:10:y:2010:i:1:n:35
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    Cited by:

    1. Conrads, Julian & Irlenbusch, Bernd & Rilke, Rainer Michael & Schielke, Anne & Walkowitz, Gari, 2014. "Honesty in tournaments," Economics Letters, Elsevier, vol. 123(1), pages 90-93.
    2. Gill, David & Prowse, Victoria & Vlassopoulos, Michael, 2013. "Cheating in the workplace: An experimental study of the impact of bonuses and productivity," Journal of Economic Behavior & Organization, Elsevier, vol. 96(C), pages 120-134.
    3. Mechtel, Mario & Bäker, Agnes, 2015. "Peer Effects in Cheating on Task Performance," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113093, Verein für Socialpolitik / German Economic Association.
    4. Julian Conrads & Mischa Ellenberger & Bernd Irlenbusch & Elia Nora Ohms & Rainer Michael Rilke & Gari Walkowitz, 2017. "Team Goal Incentives and Individual Lying Behavior," WHU Working Paper Series - Economics Group 17-02, WHU - Otto Beisheim School of Management.
    5. Seeun Jung & Kenneth Houngbedji, 2014. "Shirking, Monitoring, and Risk Aversion," Working Papers halshs-00965532, HAL.
    6. Danilov, Anastasia & Biemann, Torsten & Kring, Thorn & Sliwka, Dirk, 2013. "The dark side of team incentives: Experimental evidence on advice quality from financial service professionals," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 266-272.
    7. Conrads, Julian & Irlenbusch, Bernd & Rilke, Rainer Michael & Walkowitz, Gari, 2013. "Lying and team incentives," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 1-7.
    8. Boosey, Luke & Goerg, Sebastian J., 2018. "The Timing of Discretionary Bonuses: Effort, Signals, and Reciprocity," IZA Discussion Papers 11580, Institute for the Study of Labor (IZA).
    9. Belot, Michèle & Schröder, Marina, 2013. "Sloppy work, lies and theft: A novel experimental design to study counterproductive behaviour," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 233-238.
    10. Nives Della Valle & Matteo Ploner, 2017. "Reacting to Unfairness: Group Identity and Dishonest Behavior," Games, MDPI, Open Access Journal, vol. 8(3), pages 1-19, July.
    11. Welsh, David T. & Ordóñez, Lisa D., 2014. "The dark side of consecutive high performance goals: Linking goal setting, depletion, and unethical behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 123(2), pages 79-89.
    12. Cadsby, C. Bram & Du, Ninghua & Song, Fei, 2016. "In-group favoritism and moral decision-making," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 59-71.
    13. Sarah Necker, 2016. "Why do scientists cheat? Insights from behavioral economics," Review of Social Economy, Taylor & Francis Journals, vol. 74(1), pages 98-108, March.
    14. Seeun Jung & Kenneth Houngbedji, 2014. "Shirking, Monitoring, and Risk Aversion," PSE Working Papers halshs-00965532, HAL.
    15. Seeun JUNG, 2014. "Risk Attitudes and Shirking on the Quality of Work under Monitoring: Evidence from a Real-Effort Task Experiment," THEMA Working Papers 2014-26, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    16. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, Elsevier.
    17. Agnes Baeker & Mario Mechtel, 2015. "Peer Settings Induce Cheating on Task Performance," IAAEU Discussion Papers 201506, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    18. Delfgaauw, Josse & Dur, Robert & Non, Arjan & Verbeke, Willem, 2014. "Dynamic incentive effects of relative performance pay: A field experiment," Labour Economics, Elsevier, vol. 28(C), pages 1-13.
    19. Karen Niven & Colm Healy, 2016. "Susceptibility to the ‘Dark Side’ of Goal-Setting: Does Moral Justification Influence the Effect of Goals on Unethical Behavior?," Journal of Business Ethics, Springer, vol. 137(1), pages 115-127, August.
    20. Nieken, Petra & Dato, Simon, 2016. "Compensation and Honesty: Gender Differences in Lying," Annual Conference 2016 (Augsburg): Demographic Change 145758, Verein für Socialpolitik / German Economic Association.
    21. Faravelli, Marco & Friesen, Lana & Gangadharan, Lata, 2015. "Selection, tournaments, and dishonesty," Journal of Economic Behavior & Organization, Elsevier, vol. 110(C), pages 160-175.
    22. Janna Ter Meer, 2014. "The indirect effect of monetary incentives on deception," Cologne Graduate School Working Paper Series 05-04, Cologne Graduate School in Management, Economics and Social Sciences.

    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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