Abstract

https://ssrn.com/abstract=2875989
 


 



Loss Aversion and Lying Behavior: Theory, Estimation and Empirical Evidence


Ellen Garbarino


The University of Sydney

Robert Slonim


The University of Sydney; IZA Institute of Labor Economics

Marie Claire Villeval


National Center for Scientific Research (CNRS) - Groupe d'Analyse et de Théorie Economique (GATE); IZA Institute of Labor Economics; Department of Public Finance, University of Innsbruck

December 11, 2016


Abstract:     
We theoretically show that agents with loss-averse preferences facing a decision to receive a bad financial payoff if they report honestly or to receive a better financial payoff if they report dishonestly are more likely to lie to avoid receiving the low payoff the lower the ex-ante probability of the bad outcome. This occurs due to the ex-ante expected payoff increasing as the bad outcome becomes less likely, and hence the greater the loss that can be avoided by lying. We demonstrate robust support for this role of loss aversion on lying by reanalyzing the results from the extant literature covering 74 studies and 363 treatments, and from two new experiments that vary the outcome probabilities and examine lying for personal gain and for gains to causes one supports or opposes. To measure and compare lying behavior across treatments and studies, we develop an empirical method that estimates the full distribution of dishonesty when agents privately observe the outcome of a random process and can misreport what they observed.

Number of Pages in PDF File: 66

Keywords: Loss Aversion, Dishonesty, Lying, Econometric Estimation, Experimental Economics

JEL Classification: C91, C81, D03


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Date posted: November 29, 2016 ; Last revised: December 12, 2016

Suggested Citation

Garbarino, Ellen and Slonim, Robert and Villeval, Marie Claire, Loss Aversion and Lying Behavior: Theory, Estimation and Empirical Evidence (December 11, 2016). Available at SSRN: https://ssrn.com/abstract=2875989 or http://dx.doi.org/10.2139/ssrn.2875989

Contact Information

Ellen Garbarino
The University of Sydney ( email )
Robert Slonim
The University of Sydney ( email )
University of Sydney
Sydney, NC NSW 2006
Australia
IZA Institute of Labor Economics ( email )
P.O. Box 7240
Bonn, D-53072
Germany

Marie Claire Villeval (Contact Author)
National Center for Scientific Research (CNRS) - Groupe d'Analyse et de Théorie Economique (GATE) ( email )
93, chemin des Mouilles
Ecully, 69130
France
+33 472 86 60 79 (Phone)
+33 472 86 60 90 (Fax)
HOME PAGE: http://www.gate.cnrs.fr/equipe/perso/villeval/villeval.html
IZA Institute of Labor Economics
P.O. Box 7240
Bonn, D-53072
Germany

Department of Public Finance, University of Innsbruck ( email )
Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria
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