Deception in Networks: A Laboratory Study

• Date: 01 April 2016
• DOI: http://doi.org/10.1111/jpet.12170
• Published date: 01 April 2016

DECEPTION IN NETWORKS:ALABORATORY STUDY

RONG RONG

Weber State University

DANIEL HOUSER

George Mason University

Abstract

Communication between departments within a firm may include de-

ception. Theory suggests that telling lies in these environments may

be strategically optimal if there exists a small difference in monetary

incentives. We design a laboratory experiment to investigate whether

agents with different monetary incentives in a network environment lie

to each other. We found that most communication within an incentive

group is truthful and deception often occurs between subjects from

different groups. These results align with the prediction of the exist-

ing theory. Our findings have important implications for intraorganiza-

tional conflict management, demonstrating that in order to minimize

deceptive communication between departments the firm may need to

reduce incentive differences between these groups.

1. Introduction

Groups with different financial incentives often deceive each other for strategic rea-

sons. Within an organization, for example, people from different departments often

manipulate the information they send to each other so that executive decisions will be

in their favor. A familiar example occurs when academic departments make hiring de-

cisions. Faculty members in a specific field may withhold important information about

certain candidates from faculty of other fields, hoping to raise the priority of hiring

a colleague in one’s own field. Not surprisingly, this phenomenon has also been ob-

served in many nonacademic organizations, including important business sectors such

as high-tech research and development, mass media, and health care (Gupta, Raj, and

Wilemon 1985; Cloke and Goldsmith 2000; Cowan 2003; Eckman and Lindlof 2003;

Pirnejad et al. 2008). The negative impacts of deception due to the conflict of interest

have been documented widely in studies of industrial and organizational psychology,

as well as management (Kolb, Putnam, and Bartunek 1992; Rahim 2000; De Dreu and

Gelfand 2007; Conrad and Poole 2011; Miller 2011).

We thank NSF Dissertation Improvement Award for financial support of this project. For helpful com-

ments, we thank our colleagues at ICES, George Mason University, and Goddard School of Business

and Economics at Weber State University, and seminar participants at the ESA North-American meet-

ing (2012). The authors are, of course, responsible for any errors in this paper.

Received May 2, 2013; Accepted June 10, 2015.

C2016 Wiley Periodicals, Inc.

Journal of Public Economic Theory, 18 (2), 2016, pp. 313–326.

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