Header

UZH-Logo

Maintenance Infos

Deception and Incentives. How Dishonesty Undermines Effort Provision


Ederer, Florian; Fehr, Ernst (2007). Deception and Incentives. How Dishonesty Undermines Effort Provision. Working paper series / Institute for Empirical Research in Economics No. 341, University of Zurich.

Abstract

In this paper we show that subtle forms of deceit undermine the effectiveness of incentives.nWe design an experiment in which the principal has an interest in underreporting the true performance difference between the agents in a dynamic tournament. According to thenstandard approach, rational agents should completely disregard the performance feedback of self-interested principals and choose their effort level as if they had not been given any information. However, despite substantial underreporting many principals seem to exhibit lying aversion which renders their feedback informative. Therefore, the agents respond to the feedback but discount it strongly by reducing their effort relative to fully truthful performance feedback. Moreover, previous experiences of being deceived exacerbate the problem and eventually reduce average effort even below the level that prevails in the absence of any feedback. Thus, both no feedback and truthful feedback are better for incentives than biased feedback.

Abstract

In this paper we show that subtle forms of deceit undermine the effectiveness of incentives.nWe design an experiment in which the principal has an interest in underreporting the true performance difference between the agents in a dynamic tournament. According to thenstandard approach, rational agents should completely disregard the performance feedback of self-interested principals and choose their effort level as if they had not been given any information. However, despite substantial underreporting many principals seem to exhibit lying aversion which renders their feedback informative. Therefore, the agents respond to the feedback but discount it strongly by reducing their effort relative to fully truthful performance feedback. Moreover, previous experiences of being deceived exacerbate the problem and eventually reduce average effort even below the level that prevails in the absence of any feedback. Thus, both no feedback and truthful feedback are better for incentives than biased feedback.

Statistics

Downloads

501 downloads since deposited on 29 Nov 2011
17 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:November 2007
Deposited On:29 Nov 2011 22:47
Last Modified:12 Aug 2017 13:04
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

Download

Download PDF  'Deception and Incentives. How Dishonesty Undermines Effort Provision'.
Preview
Filetype: PDF
Size: 518kB