IDEAS home Printed from https://ideas.repec.org/p/hhs/gunwpe/0689.html

Would I lie to you? Strategic deception in the face of uncertain penalties

Author

Listed:
  • Cardak, Buly A

    (Department of Economics and Finance, La Trobe Business School, La Trobe University)

  • Neelim, Ananta

    (School of Economics, Finance and Marketing, RMIT University)

  • Vecci, Joseph

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Wu, Kevin

    (Department of Economics, Monash University, Australia)

Abstract

Using an experiment we investigate the effect of different centralised punishment mechanisms on deception and beliefs about deception in a principal-agent interaction that resembles many everyday expert advisor - client relationships. Agents have private information to transmit to Principals who must decide whether to follow Agent advice. Across our treatments, Agents face a range of expected penalties for deceptive behaviour with varying severity and monitoring probability. The Bayesian Nash equilibrium of the principal-agent interaction predicts penalties to have no effect on Agent behaviour. We find the magnitude of penalties to have important deterrent effects on deceptive Agent behaviour while Agents do not respond to changes in monitoring probabilities. Principal following behaviour increases in response to high penalties. However, it is unaffected by equivalent increases in monitoring. To help us understand the mechanism through which penalties deter deceptive behaviour, we test whether framing activates norms, providing an additional deterrence effect. We find norms are only activated by large penalties, providing a possible explanation for the impact of penalties on deceptive behaviour.

Suggested Citation

  • Cardak, Buly A & Neelim, Ananta & Vecci, Joseph & Wu, Kevin, 2017. "Would I lie to you? Strategic deception in the face of uncertain penalties," Working Papers in Economics 689, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0689
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/2077/51443
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
    2. Catherine C. Eckel & Philip J. Grossman, 2002. "Sex Differences and Statistical Stereotyping in Attitudes Toward Financial Risk," Monash Economics Working Papers archive-03, Monash University, Department of Economics.
    3. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
    4. Uri Gneezy & Stephan Meier & Pedro Rey-Biel, 2011. "When and Why Incentives (Don't) Work to Modify Behavior," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 191-210, Fall.
    5. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
    6. Lana Friesen, 2012. "Certainty of Punishment versus Severity of Punishment: An Experimental Investigation," Southern Economic Journal, Southern Economic Association, vol. 79(2), pages 399-421, October.
    7. Klaus Abbink & Bernd Irlenbusch & Elke Renner, 2002. "An Experimental Bribery Game," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(2), pages 428-454, October.
    8. Gregory DeAngelo & Gary Charness, 2012. "Deterrence, expected cost, uncertainty and voting: Experimental evidence," Journal of Risk and Uncertainty, Springer, vol. 44(1), pages 73-100, February.
    9. A. Mitchell Polinsky & Steven Shavell (ed.), 2007. "Handbook of Law and Economics," Handbook of Law and Economics, Elsevier, edition 1, volume 2, number 2.
    10. Rajna Gibson & Carmen Tanner & Alexander F. Wagner, 2013. "Preferences for Truthfulness: Heterogeneity among and within Individuals," American Economic Review, American Economic Association, vol. 103(1), pages 532-548, February.
    11. Matthias Sutter, 2009. "Deception Through Telling the Truth?! Experimental Evidence From Individuals and Teams," Economic Journal, Royal Economic Society, vol. 119(534), pages 47-60, January.
    12. Anderson, Lisa R & Stafford, Sarah L, 2003. "Punishment in a Regulatory Setting: Experimental Evidence from the VCM," Journal of Regulatory Economics, Springer, vol. 24(1), pages 91-110, July.
    13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    14. Ronald Peeters & Marc Vorsatz & Markus Walzl, 2013. "Truth, Trust, and Sanctions: On Institutional Selection in Sender–Receiver Games," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(2), pages 508-548, April.
    15. Jean‐Robert Tyran & Lars P. Feld, 2006. "Achieving Compliance when Legal Sanctions are Non‐deterrent," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 135-156, March.
    16. William Harbaugh & Naci Mocan & Michael Visser, 2013. "Theft and Deterrence," Journal of Labor Research, Springer, vol. 34(4), pages 389-407, December.
    17. Block, Michael K & Gerety, Vernon E, 1995. "Some Experimental Evidence on Differences between Student and Prisoner Reactions to Monetary Penalties and Risk," The Journal of Legal Studies, University of Chicago Press, vol. 24(1), pages 123-138, January.
    18. Erin L. Krupka & Roberto A. Weber, 2013. "Identifying Social Norms Using Coordination Games: Why Does Dictator Game Sharing Vary?," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 495-524, June.
    19. Menusch Khadjavi, 2015. "On the Interaction of Deterrence and Emotions," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(2), pages 287-319.
    20. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
    21. Polinsky, A. Mitchell & Shavell, Steven, 2007. "The Theory of Public Enforcement of Law," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 1, chapter 6, pages 403-454, Elsevier.
    22. Krupka, Erin & Weber, Roberto A., 2009. "The focusing and informational effects of norms on pro-social behavior," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 307-320, June.
    23. Leibbrandt, Andreas & López-Pérez, Raúl, 2012. "An exploration of third and second party punishment in ten simple games," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 753-766.
    24. A. Mitchell Polinsky & Steven Shavell (ed.), 2007. "Handbook of Law and Economics," Handbook of Law and Economics, Elsevier, edition 1, volume 1, number 1.
    25. James Andreoni, 1991. "Reasonable Doubt and the Optimal Magnitude of Fines: Should the Penalty Fit the Crime?," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 385-395, Autumn.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Feess, Eberhard & Schildberg-Hörisch, Hannah & Schramm, Markus & Wohlschlegel, Ansgar, 2018. "The impact of fine size and uncertainty on punishment and deterrence: Theory and evidence from the laboratory," Journal of Economic Behavior & Organization, Elsevier, vol. 149(C), pages 58-73.
    2. Deffains, Bruno & Espinosa, Romain & Fluet, Claude, 2019. "Laws and norms: Experimental evidence with liability rules," International Review of Law and Economics, Elsevier, vol. 60(C).
    3. Markussen, Thomas & Putterman, Louis & Tyran, Jean-Robert, 2016. "Judicial error and cooperation," European Economic Review, Elsevier, vol. 89(C), pages 372-388.
    4. Menusch Khadjavi, 2018. "Deterrence works for criminals," European Journal of Law and Economics, Springer, vol. 46(1), pages 165-178, August.
    5. Müller, Stephan & Rau, Holger A., 2018. "Motivational crowding out effects in charitable giving: Experimental evidence," University of Göttingen Working Papers in Economics 338, University of Goettingen, Department of Economics.
    6. Xiao, Erte, 2013. "Profit-seeking punishment corrupts norm obedience," Games and Economic Behavior, Elsevier, vol. 77(1), pages 321-344.
    7. Christoph Engel, 2016. "Experimental Criminal Law. A Survey of Contributions from Law, Economics and Criminology," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2016_07, Max Planck Institute for Behavioral Economics.
    8. Claude Fluet & Rpbertp Galbiati, 2016. "Lois et normes : les enseignements de l'économie comportementale," L'Actualité Economique, Société Canadienne de Science Economique, vol. 92(1-2), pages 191-215.
    9. Kirchkamp, Oliver & Mill, Wladislaw, 2020. "Conditional cooperation and the effect of punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 150-172.
    10. Gary Bolton & Eugen Dimant & Ulrich Schmidt, 2018. "When a Nudge Backfires. Using Observation with Social and Economic Incentives to Promote Pro-Social Behavior," PPE Working Papers 0017, Philosophy, Politics and Economics, University of Pennsylvania.
    11. repec:grz:wpsses:2017-01 is not listed on IDEAS
    12. Columbus, Simon & Feld, Lars P. & Kasper, Matthias & Rablen, Matthew D., 2023. "Behavioural Responses to Unfair Institutions: Experimental Evidence on Rule Compliance, Norm Polarisation, and Trust," IZA Discussion Papers 16346, IZA Network @ LISER.
    13. repec:cgr:cgsser:06-02 is not listed on IDEAS
    14. Bolton, Gary & Dimant, Eugen & Schmidt, Ulrich, 2021. "Observability and social image: On the robustness and fragility of reciprocity," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 946-964.
    15. Sheheryar Banuri & Catherine Eckel, 2015. "Cracking down on bribery," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 45(3), pages 579-600, October.
    16. DeAngelo, Gregory & Gee, Laura Katherine, 2018. "Peers or Police? Detection and Sanctions in the Provision of Public Goods," IZA Discussion Papers 11540, Institute of Labor Economics (IZA).
    17. Jeroen Ven & Marie Claire Villeval, 2015. "Dishonesty under scrutiny," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 1(1), pages 86-99, July.
    18. Xiao, Erte, 2017. "Justification and conformity," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 15-28.
    19. Khalmetski, Kiryl & Rockenbach, Bettina & Werner, Peter, 2017. "Evasive lying in strategic communication," Journal of Public Economics, Elsevier, vol. 156(C), pages 59-72.
    20. Carlos Maximiliano Senci & Hipólito Hasrun & Rodrigo Moro & Esteban Freidin, 2019. "The influence of prescriptive norms and negative externalities on bribery decisions in the lab," Rationality and Society, , vol. 31(3), pages 287-312, August.
    21. Roee Sarel, 2022. "Crime and punishment in times of pandemics," European Journal of Law and Economics, Springer, vol. 54(2), pages 155-186, October.
    22. Erte Xiao & Fangfang Tan, 2014. "Justification and Legitimate Punishment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(1), pages 168-188, March.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:gunwpe:0689. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jessica Oscarsson (email available below). General contact details of provider: https://edirc.repec.org/data/naiguse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.