A Must Lie Situation: Avoiding Giving Negative Feedback

Abstract

We examine under what conditions people provide accurate feedback to others. We use feedback regarding attractiveness, a trait people care about, and for which objective information is hard to obtain. Our results show that people avoid giving accurate face-to-face feedback to less attractive individuals,even if lying in this context comes at a monetary cost to both the person who gives the feedback and the receiver. A substantial increase of these costs does not increase the accuracy of feedback. However, when feedback is provided anonymously, the aversion to giving negative feedback is reduced.

Keywords: Lying, feedback, overconfidence, updating, laboratory experiment

JEL Classification: D03, C91, D83