Dishonesty in Complex Environments: Deliberate Lies, Short-Cuts, or Accidental Mistakes? 

Abstract

This paper studies how and why complexity affects dishonest reporting behavior. While compliance with complex reporting standards can be challenging and may lead to accidental mistakes, complexity can also enable systematic self-serving dishonesty. Our experiment disentangles these two causes of non-compliance. Causal identification relies on varying complexity in two distinct regimes: (i) a reporting task, in which subjects have a financial incentive to dishonestly inflate their reports; and (ii) an accuracy task, in which subjects are paid to produce factually correct reports. We find three main results: First, complexity significantly increases the number of factually incorrect reports. Second, complexity leads to more honest errors, but also to a pronounced dishonesty shift. Complexity increases the proportion of intentional lies by 60%. Third, we identify two mechanisms of this dishonesty shift. Individuals with strong social-image concerns have lower lying costs under complexity, because they can plausibly claim to have made honest mistakes. And in addition, some individuals take shortcuts and avoid the compliance costs of complexity altogether just to make self-serving but potentially dishonest reports.

Keywords: Dishonest behavior, Complexity, Lying, Non-Compliance, Experiment

JEL Classification: C91, D90, K42, H26