A study on Dishonesty: from Emotions and Cognition to InStItutions and OrganizatioNs – DECISION

DECISION combines knowledge from different disciplines (economics, psychology, political science, neurosciences). It employs different methods, including theoretical modeling based on behavioral game theory, experimental methods (laboratory, field and on-line experiments), survey methods, and econometric analysis.

At the individual level, we demonstrate that hedonic considerations, such as the need to maintain a positive self-image, are insufficient to explain unethical amnesia (i.e., the tendency for individuals to forget their past unethical conduct). However, when forgetting serves an instrumental purpose (for example, avoiding a future moral commitment), individuals become more likely to forget their past lies.

We also reveal that people are willing to confess their previous lies at a personal cost, which makes it possible to detect dishonesty effectively without encouraging further dishonest behavior. However, such confessions do not reduce future dishonesty.

Moreover, we show that emotional narratives have asymmetric effects on prosocial behavior, either reinforcing or weakening moral intentions depending on their content.

At the organizational level, the structure of incentives and interactions shapes dishonest behavior. Competition increases cheating, but only when everyone has the opportunity to cheat. Feedback on others' performance also increases dishonesty in piece-rate systems, but not in pure competitive environments.

In group cooperation settings, beliefs about others' behavior influence cheating decisions, depending on whether incentives are strategic substitutes or complements. Responsibility sharing plays a more limited role.

We also demonstrate that leadership plays a crucial role in shifting detrimental social norms. A minority of progressive individuals fail to change a detrimental norm without a leader, whereas a designated leader can trigger change, especially when adopting a democratic leadership style. Peer communication fosters the emergence of such democratic leadership.

At the institutional level, we find that formal institutions affect intrinsic honesty. Repeated exposure to inspections in public transportation increases unethical behavior in unrelated contexts, even among non-offenders. In the fiscal domain, we show that aggressive auditing (where authorities deviate from random rules to inspect more) can successfully increase and sustain tax compliance. The psychological impact of intense oversight appears to have lasting behavioral effects, even when deterrence is no longer actively enforced.

Finally, the perception of violations of meritocratic principles—when a system is not seen as fair—reduces adherence to civic norms, highlighting the importance of institutional legitimacy in fostering honesty.

The DECISION project addresses one of the major challenges of contemporary societies, which affects many areas of economic and social life: dishonesty. In a context marked by deep economic slowdown, a climate of insecurity, and growing mistrust toward political and economic institutions, it is crucial to better understand the mechanisms (both internal and external to the individual) that underlie dishonest decision-making.

The overarching objective of the project was to contribute to social innovation by providing new insights into the mechanisms that can effectively discourage dishonest behavior, with the aim of restoring trust, stimulating growth, and improving citizens’ living conditions.

By analyzing the emotional and cognitive determinants of dishonesty (Task 1), DECISION helped inform existing theoretical frameworks of economic behavior, shedding light on the internal mechanisms that motivate individuals to act dishonestly. Through the study of dishonest behaviors within organizations (Task 2), the project provided original insights into how private and public structures can reduce the costs associated with fraud and unethical conduct in the workplace. Finally, by exploring the link between intrinsic honesty and institutional environments (Task 3), DECISION produced novel knowledge on how to design more effective institutions that account for cross-context spillover effects and the mutability of social norms.

From a scientific and methodological perspective, the project generated significant advances in the fields of economics, psychology, and behavioral sciences, contributing to a fruitful interdisciplinary dialogue and a deeper understanding of the drivers of dishonesty in our societies.

1. Galeotti, F., V. Maggian, and M.C. Villeval (forthcoming) «Fraud Deterrence Institutions Decrease Intrinsic Honesty«, The Economic Journal.
2. Galeotti, F., C. Saucet, and M.C. Villeval (2020) «Unethical amnesia responds more to instrumental than to hedonic motives«, Proceedings of the National Academy of Sciences, 117 (41).
3. Benisant, J., Galeotti, F. and M.C. Villeval «The Distinct Impact of Information and Incentives on Cheating«, IZA Discussion Paper No. 14014 (under review at Journal of Economic Behavior & Organization)
4. Mittone, L., Ploner, M. & Verrina, E. (forthcoming) When the state does not play dice: aggressive audit strategies foster tax compliance. Social Choice & Welfare.

Dishonesty is a pervasive phenomenon of our society. It occurs when an agent violates certain moral or legal rules to gain a personal advantage. Dishonest practices have extremely detrimental consequences for society, negatively impacting growth, democracy and living conditions. They increase transaction costs, reduce trust, impede the functioning of the political system, and undermines security. Identifying the factors that influence the decision to behave dishonestly is of fundamental importance in order to understand many economic behaviors and promote a virtuous society. DECISION develops a pioneer analysis of the mechanisms, internal and external to the individual, that are involved in the decision to act dishonestly. To achieve this, it adopts a distinctive three-fold strategy. First, it looks at the individual and its internal psychological, cognitive and affective states. After that, it considers the wider context of an organization and the workplace where multiple individuals interact together. Then, it further enlarges the focus by studying how dishonesty varies and spreads in society where the interactions between individuals are regulated and shaped by formal and informal institutions.

More specifically, DECISION studies:

(i) The emotional and cognitive determinants of dishonest behavior (Task 1);

(ii) Which features of an organization contribute to individual and joint dishonesty (Task 2);

(iii) How deterrence institutions and social norms impact on intrinsic honesty (Task 3).

DECISION is based on a four-year interdisciplinary program which incorporates knowledge from different disciplines, including economics, psychology, political science, and neurosciences. It also embraces a multi-methodological approach involving theory, experiments (in the laboratory, in the field and on-line), the study of psychometric data, and the analysis of real world data. Over the course of these four years, DECISION is expected to generate substantial research advances to the understanding of dishonest behavior and provide important policy recommendations on how to reduce dishonest behavior and minimize its social impact.