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

GATE Working Paper no 1631, 2016

68 Pages Posted: 30 Nov 2016 Last revised: 19 Jul 2017

See all articles by Ellen Garbarino

Ellen Garbarino

The University of Sydney

Robert Slonim

The University of Sydney; IZA Institute of Labor Economics

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS; IZA Institute of Labor Economics; Global Labor Organization (GLO)

Multiple version iconThere are 3 versions of this paper

Date Written: July 2017

Abstract

We theoretically show that loss-averse agents are more likely to lie to avoid receiving a low payoff after a random draw, the lower the ex-ante probability of this bad outcome. The ex-ante expected payoff increases as the bad outcome becomes less likely, and hence the greater is the loss avoided by lying. We demonstrate robust support for this theory by reanalyzing the results from the extant literature and with two new experiments that vary the outcome probabilities and are run doubleanonymous to remove reputation effects. To measure lying, we develop an empirical method that estimates the full distribution of dishonesty

Keywords: loss aversion, dishonesty, econometric estimation, experimental economics, lying

JEL Classification: C91, C81, D03

Suggested Citation

Garbarino, Ellen and Slonim, Robert and Villeval, Marie Claire, Loss Aversion and Lying Behavior: Theory, Estimation and Empirical Evidence (July 2017). GATE Working Paper no 1631, 2016. Available at SSRN: https://ssrn.com/abstract=2876636 or http://dx.doi.org/10.2139/ssrn.2876636

Ellen Garbarino (Contact Author)

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

Groupe d'Analyse et de Théorie Economique (GATE), CNRS ( 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

Global Labor Organization (GLO) ( email )

Collogne
Germany

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