Negative Externalities of Cheating: An Experiment with Charities

An extensive body of research investigates the emergence and characterization of dishonesty by means of the die-under-cup paradigm. However, most of the previous studies do not take into account the negative externalities of unethical behavior, since lying to increase the liar`s payoff only decreases the experimental budget. In this chapter, we experimentally investigate the effect of imposing negative externalities on a charity organization when cheating. In a sample composed by 192 students, comparison between our Baseline treatment and our Charity treatment reveals no significant difference on subjects` reporting decision. Our analysis does not provide any statistical support to the hypothesis that dishonest behavior may be lower when negative externalities associated with unethical behavior are affecting a charity organization rather than the experimental budget.

Recently, in an increasing number of studies (Fischbacher and Follmi-Heusi, 2013; Gächter and Schulz, 2016; Weisel and Shalvi, 2015), scholars have investigated the emergence and characterization of dishonesty by means of a die-under-cup task. In the standard version of the task, participants are asked to privately roll a six-sided die twice in the cup and to report the first roll: since payment is according to reported roll, individuals are incentivized to report a higher number with respect to the actual one. In these studies, reporting a lower number than the one corresponding to the maximum payoff is considered as an evidence of lying aversion. In the great majority of these studies, however, the organizational costs associated with lying are represented by the experimental budget, which does not necessarily reflect the usual situations people encounter in the real world. In particular, lying aimed to increase the liar’s payoff often imposes a cost on others. For example, when cheating on an exam, students indirectly damage their (honest) classmates, by making comparison unfairly competitive. Similarly, when cheating on taxes, citizens decrease the amount of resources available for the community. In this experiment, we aim to test whether people’s decision to lie also depends on the identity of the victim of the unethical behavior. In particular, we investigate the effects of imposing negative externalities on a charity organization when cheating. The consequences of the dishonest behavior will thus increase the liar’s payoff while reducing the amount of money donated to a charity organization. In our Baseline treatment, the cost of the lie is borne by the experimental budget while in our Charity treatment the individual’s unethical behavior decreases the budget devoted to a charity organization. Our experiment provides evidence that social concerns are activated to a similar extent when cheating on an organization with clear and explicit benevolent objectives or on an anonymous organization. Our results suggest that the identity of the receiver of the lie does not play a significant role in the decision to behave unethically.