Little Lies and Blind Eyes – Experimental Evidence on Cheating and Task Performance in Work Groups

We investigate cheating in work groups, to empirically test the idea of an honest workplace environment as a determinant of performance. Three individuals receive team-based performance pay for executing a real-effort task. In addition, two of them have the opportunity to obtain a bonus in a dice game, which allows cheating without exposure by misreporting a secret die roll. We are particularly interested in the behavioral response of the bystander as the potential witness to the dishonest action. To identify the implications of lies at work, the rules of the bonus game were altered to randomly prevent cheating, or not, across treatment conditions while holding the monetary consequences constant. Survey data enables us to analyze effect heterogeneity and to explore mechanisms underlying behavioral responses. We begin our analysis by estimating the mean lying rate and find that the opportunity-to-cheat is exploited in roughly 42% of cases. The probability of misreporting increases if the cheater's partner in crime is male. Contrary to claims on the importance of honesty at work, we do not observe a reduction in performance when cheating takes place, neither for the bystander nor for the whole team. Bounded awareness could be an explanation, as we find substantial evidence for effect heterogeneity along the lines of information preferences. Bystanders with higher preferences for inconvenient information provide relatively low task performance, compared to those with lower information preferences, who seem to turn a blind eye to the dishonest action of their co-workers by putting increased effort into their work.