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Experimental Economics

, Volume 22, Issue 1, pp 101–130 | Cite as

The interaction between competition and unethical behaviour

  • Nick FeltovichEmail author
Original Paper

Abstract

We examine the interplay between unethical behaviour and competition with a lab experiment. Subjects play the role of firms in monopoly, weak competition (Bertrand–Edgeworth duopoly) or strong competition (Bertrand duopoly). Costs are determined either by a computer draw or a self-reported die roll, and pricing decisions are made with knowledge of one’s own costs and—in duopoly—the rival firm’s costs. Under self-reporting, lying is profitable and undetectable except statistically. We find that competition and lying are mutually reinforcing. We observe strong evidence that (behavioural) competition in both duopoly treatments is more intense when lying is possible: prices are significantly lower than when lying is impossible, even controlling for differences in costs. We also observe more lying under duopoly than monopoly—despite the greater monetary incentives to lie in the monopoly case—though these differences are not always significant.

Keywords

Lying Dishonesty Truthfulness Experiment Monopoly Duopoly 

JEL Classification

K42 A13 D40 D03 C90 

Supplementary material

10683_2018_9578_MOESM1_ESM.docx (21 kb)
Supplementary material 1 (docx 20 KB)
10683_2018_9578_MOESM2_ESM.docx (206 kb)
Supplementary material 2 (docx 206 KB)

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Copyright information

© Economic Science Association 2018

Authors and Affiliations

  1. 1.Department of EconomicsMonash UniversityClaytonAustralia

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