19 Pages Posted: 24 Oct 2014 Last revised: 11 Dec 2014
Date Written: April 1, 2014
Communication between departments within a firm may include deception. Theory suggests that telling lies in these environments may be strategically optimal if there exists a small difference in monetary incentives (Crawford and Sobel, 1982; Galeotti et al, 2012). We design a laboratory experiment to investigate whether agents with different monetary incentives in a network environment behave according to theoretical predictions. We found that players’ choices are consistent with the theory. That is, most communication within an incentive group is truthful and deception often occurs between subjects from different groups. These results have important implications for intra-organizational conflict management, demonstrating that in order to minimize deceptive communication between departments the firm may need to reduce incentive differences between these groups.
Keywords: social networks, deception, strategic information transmission, experiments
JEL Classification: D85, D02, C92
Suggested Citation: Suggested Citation
Rong, Rong and Houser, Daniel, Deception in Networks: A Laboratory Study (April 1, 2014). GMU Working Paper in Economics No. 14-41. Available at SSRN: https://ssrn.com/abstract=2514037 or http://dx.doi.org/10.2139/ssrn.2514037