Dishonesty and the intensity of competition

What is it about?

We argue that dishonesty is highest for intermediate levels of competition. To make the point we first work through a simple theoretical model. In the model workers either honestly report low effort, or lie and report high effort. The employer then rewards the X workers reporting the highest output. If X is large or small then the equilibrium proportion of workers reporting high effort is relatively low. Essentially there is no point in being dishonest if this is unlikely to earn a reward. If X is intermediate then the equilibrium proportion reporting high effort is relatively high. In this case a reward may critically depend on whether or not the worker lies and so there is more incentive to lie. We supplement the theoretical model with a simple experiment. In the experiment subjects self-report how many questions they got correct on a multiple choice quiz. We compare a no competition treatment (high X) with a medium competition treatment (X = 6) and a high competition treatment (X = 2). As predicted the amount of cheating, as measured by the number of correct answers on the quiz, is significantly higher in the medium competition treatment.

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Why is it important?

The consensus in the literature was that the higher the level of competition the more incentive for dishonesty. The logic seemed to be that in highly competitive situations you need to cheat to win. Our work challenges that view. The intuition is relatively simple: if competition is very high then the person stands little chance of winning, whether they cheat or not. So, why pay the cost of cheating? Incentives to cheat are most pronounced when cheating is likely to be the difference between success and failure. That is only going to happen when the chances of success are reasonable, and that means intermediate levels of competition. To put some perspective on this consider doping in sport. To be the champion is highly competitive. We would argue that this provides little incentive to dope. Sure, the winner may well have doped but that does not mean lots of others have. Doping is not going to guarantee being a champion. But, at the level of getting on the team, or maintaining a sponsorship deal, competition is less. Here doping may well be the difference between success and failure. So, incentives to dope are higher.