Cheating with Externalities and a Regular Audience

Reports, for example, tax returns, research findings, or peer evaluations, can in some instances be falsified. We develop an experiment to study how externalities affect an individual’s self-reporting behaviors. We modify the cheating game (Fischbacher & Föllmi-Heusi, 2013) by matching a reporter with a peer subject and manipulate the externality. Specifically, the reporter privately rolls a die and then issues a report on the outcome, which determines the earnings of both the reporter and the audience. Another design arm compares treatments with and without the experimenter observing the die-rolls. In the existing literature on the cheating game, the experimenter is typically assumed to serve as a relevant audience, which contrasts with the perceived role of the experimenter in most other laboratory experiments. We aim to explore whether the observability of die-rolls by the experimenter affects the decision-maker’s behavior when a regular audience is present.