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Honesty in intra-organizational reporting

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Abstract

In this experimental study we analyze the trade-off between the subjects’ preference for wealth on the one hand and their preference for honesty on the other hand. The purpose of this research is to examine the effect of communication medium on reporting behavior. We want to know whether situational cues, such as the communication method—digital (via computer) vs. hard-copy (via paper and pencil) matter, while considering deception. Furthermore, we are interested in the relationship between the social value orientation (SVO) and the reporting behavior. While the experimental evidence shows that participants in both treatments have a preference for truthful reporting and they avoid major lies, there are also remarkable differences between the treatments which we attribute to the reporting medium: computer treatment CT versus paper-and-pencil treatment PPT. Agents are willing to report more honestly via a hard-copy medium than via a digital medium. It seems like participants perceive the digital report more confidential and anonymous than the hard-copy report, and that is why they tend to misrepresent in the CT rather than in the PPT. Further, we found that the SVO influences reporting behavior.

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Notes

  1. The values of X used in these two treatments are different. However, there are no systematical differences between them, because the same programmed random algorithm was used to forecast these values. We tested the difference between values of X used in the CT and in the PPT also statistically and found no significant differences.

  2. The regression of integrity (i) on SVO gives similar results, in the CT even the same (because h = i) and in the PPT we find slightly higher difference between the integrity of cooperative and individualistic types: β = 0.226 and p < 0.02 (R 2 =  0.076).

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Acknowledgments

We are grateful for valuable hints by Reinhard Selten and two anonymous referees.

Author information

Authors and Affiliations

  1. Institute for Statistics and Operations Research, University of Graz, Universitätsstraße 15/E3, 8010, Graz, Austria

    Arleta Rasmußen & Ulrike Leopold-Wildburger

Authors
  1. Arleta Rasmußen
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  2. Ulrike Leopold-Wildburger
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Corresponding author

Correspondence to Arleta Rasmußen.

Appendices

Appendix 1: Instructions CT

Dear participants!

Thank you for your participation in this experiment. Please read carefully the instructions before starting the experiment! Your decisions during the experiment are connected with real payoffs. I.e. the more experimental Lira you earn in the experiment, the higher is your payoff in €. The exact conversion rate is: 1 experimental Lira = 0.20€.

The experiment consists of three parts: (1) the reporting experiment, (2) a short post-experimental questionnaire and (3) the preferences questionnaire.

1.1 The experimental task

The experiment reproduces the relationship between two parties within a company: the department manager (you) and the hypothetical shareholder (computer). You are the department manager of a company that has recently started a project that runs over five periods. You have been chosen as the main responsible person for the project.

It is common knowledge that the actual period’s production X ranges between 200 and 400 pieces, in steps of 20. You are however, due to your experience, able to forecast the actual period’s production for sure. You receive, at the beginning of each period, private perfect (100 % certain) information regarding the production. The level of production is random in each period.

Your task, each period, is to make a report regarding the production to the shareholder.

The following table includes your payoffs and payoffs of the shareholder for all possible X–B-combinations (your payoff/shareholders payoff) and it shell help you to determine your compensation:

 

Actual production X

200

220

240

260

280

300

320

340

360

380

400

Report B

 200

50/60

56/65

62/70

68/75

74/80

80/85

86/90

92/95

98/100

104/105

110/110

 220

48/58

54/63

60/68

66/73

72/78

78/83

84/88

90/93

96/98

102/103

108/108

 240

46/56

52/61

58/66

64/71

70/76

76/81

82/86

88/91

94/96

100/101

106/106

 260

44/54

50/59

56/64

62/69

68/74

74/79

80/84

86/89

92/94

98/99

104/104

 280

42/52

48/57

54/62

60/67

66/72

72/77

78/82

84/87

90/92

96/97

102/102

 300

40/50

46/55

52/60

58/65

64/70

70/75

76/80

82/85

88/90

94/95

100/100

 320

38/48

44/53

50/58

56/63

62/68

68/73

74/78

80/83

86/88

92/93

98/98

 340

36/46

42/51

48/56

54/61

60/66

66/71

72/76

78/81

84/86

90/91

96/96

 360

34/44

40/49

46/54

52/59

58/64

64/69

70/74

76/79

82/84

88/89

94/94

 380

32/42

38/47

44/52

50/57

56/62

62/67

68/72

74/77

80/82

86/87

92/92

 400

30/40

36/45

42/50

48/55

54/60

60/65

66/70

72/75

78/80

84/85

90/90

After the last period one period-production level will be determined by chance and your payoff will be calculated accordingly your reporting decision in that particular period.

The shareholder will never find out, whether you have reported truthfully or not.

Try to put yourself into the situation and try to behave as if you were involved in a real decision making process.

Thank you for your participation!

Appendix 2: Instructions PPT

Dear participants!

Thank you for your participation in this experiment. Please read carefully the instructions before starting the experiment!

Your decisions during the experiment are connected with real payoffs. I.e. the more experimental Lira you earn in the experiment, the higher is your payoff in €.

The exact conversion rate is: 1 experimental Lira = 0.20€.

The experiment consists of three parts: (1) the reporting experiment, (2) a short post-experimental questionnaire and (3) a preferences questionnaire.

2.1 The experimental task

The experiment reproduces the relationship between two parties within a company: the department manager (you) and the hypothetical shareholder. You are the department manager of a company that has recently started a project that runs over five periods. You have been chosen as the main responsible person for the project.

It is common knowledge that the actual period’s production X ranges between 200 and 400 pieces, in steps of 20. You are however, due to your experience, able to forecast the actual period’s production for sure. You receive, at the beginning of each period, private perfect (100 % certain) information regarding the production. The level of production is random in each period.

Your task, each period, is to make a report regarding the production to the shareholder.

The following table includes your payoffs and payoffs of the shareholder for all possible X–B-combinations (your payoff/shareholder’s payoff) and it shell help you to determine your compensation:

 

Actual production X

200

220

240

260

280

300

320

340

360

380

400

Report B

 200

50/60

56/65

62/70

68/75

74/80

80/85

86/90

92/95

98/100

104/105

110/110

 220

48/58

54/63

60/68

66/73

72/78

78/83

84/88

90/93

96/98

102/103

108/108

 240

46/56

52/61

58/66

64/71

70/76

76/81

82/86

88/91

94/96

100/101

106/106

 260

44/54

50/59

56/64

62/69

68/74

74/79

80/84

86/89

92/94

98/99

104/104

 280

42/52

48/57

54/62

60/67

66/72

72/77

78/82

84/87

90/92

96/97

102/102

 300

40/50

46/55

52/60

58/65

64/70

70/75

76/80

82/85

88/90

94/95

100/100

 320

38/48

44/53

50/58

56/63

62/68

68/73

74/78

80/83

86/88

92/93

98/98

 340

36/46

42/51

48/56

54/61

60/66

66/71

72/76

78/81

84/86

90/91

96/96

 360

34/44

40/49

46/54

52/59

58/64

64/69

70/74

76/79

82/84

88/89

94/94

 380

32/42

38/47

44/52

50/57

56/62

62/67

68/72

74/77

80/82

86/87

92/92

 400

30/40

36/45

42/50

48/55

54/60

60/65

66/70

72/75

78/80

84/85

90/90

After the last period one period-production level will be determined by chance and your payoff will be calculated accordingly your reporting decision in that particular period.

After you have read the instructions take the large envelope containing:

  • a set of report forms sequentially ordered (beginning with period 1) (yellow sheet of paper with the appropriate period number),

  • very short post-experimental questionnaire (blue form) and

  • preferences questionnaire (red form).

Each report form provides the perfect (100 % certain) information regarding the period’s production and also the payoff-table. At the beginning of each period:

  1. 1.

    take one report form from the envelope,

  2. 2.

    put your confidential participant number on it,

  3. 3.

    after seeing the perfect information of the production consult the payoff-table make your report decision and

  4. 4.

    proceed to the next period.

The shareholder will never find out, whether you have reported truthfully or not.

Try to put yourself into the situation and try to behave as if you were involved in a real decision making process.

After the last experimental period fill in all questionnaires ((1) the post-experimental questionnaire and (2) the preferences questionnaire). Please put your confidential participant number on each form in the field “your confidential participant number”.

Thank you for your participation!

Appendix 3: Post-experimental questionnaire

See Table 6.

Table 6 Post-experimental questionnaire
Full size table

Appendix 4: Ring measure of social values

Appendix 5: CT—experimental task

See Fig. 6.

Fig. 6
figure 6

Screen shot of the experimental task (CT)

Full size image

Appendix 6: Report Form PPT

 

Actual production X

200

220

240

260

280

300

320

340

360

380

400

Report B

 200

50/60

56/65

62/70

68/75

74/80

80/85

86/90

92/95

98/100

104/105

110/110

 220

48/58

54/63

60/68

66/73

72/78

78/83

84/88

90/93

96/98

102/103

108/108

 240

46/56

52/61

58/66

64/71

70/76

76/81

82/86

88/91

94/96

100/101

106/106

 260

44/54

50/59

56/64

62/69

68/74

74/79

80/84

86/89

92/94

98/99

104/104

 280

42/52

48/57

54/62

60/67

66/72

72/77

78/82

84/87

90/92

96/97

102/102

 300

40/50

46/55

52/60

58/65

64/70

70/75

76/80

82/85

88/90

94/95

100/100

 320

38/48

44/53

50/58

56/63

62/68

68/73

74/78

80/83

86/88

92/93

98/98

 340

36/46

42/51

48/56

54/61

60/66

66/71

72/76

78/81

84/86

90/91

96/96

 360

34/44

40/49

46/54

52/59

58/64

64/69

70/74

76/79

82/84

88/89

94/94

 380

32/42

38/47

44/52

50/57

56/62

62/67

68/72

74/77

80/82

86/87

92/92

 400

30/40

36/45

42/50

48/55

54/60

60/65

66/70

72/75

78/80

84/85

90/90

Appendix 7: Statistics: Post-experimental Questionnaire

See Table 7.

Table 7 Statistics: post-experimental questionnaire
Full size table

Appendix 8: Honesty measures

See Tables 8 and 9.

Table 8 Honesty h
Full size table
Table 9 Integrity i
Full size table

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Rasmußen, A., Leopold-Wildburger, U. Honesty in intra-organizational reporting. J Bus Econ 84, 929–958 (2014). https://doi.org/10.1007/s11573-014-0740-6

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