Events at CERGE-EI

Stefano Fiorin, Ph.D.

The University of California, San Diego, Rady School of Management, USA

Author: Stefano Fiorin

Abstract: Peers often know more than principals about agents’ misbehaviors. Yet, reporting a peer’s wrongdoing to an authority is a morally controversial decision: it might harm the peer but also prevent future misconduct. Denunciations are sometimes encouraged through monetary rewards. I study how moral concerns influence the efficacy of financial incentives for reporting peers’ wrongdoing. In a randomized field experiment with employees of the Afghan Ministry of Education who are asked to confidentially report on their colleagues’ attendance, 15.21% of participants issue reports of recent absence which can have negative consequences for the colleagues. Reporting is 4.76 percentage points lower when denunciations are incentivized through monetary rewards. The two-by-two design also cross-randomizes the consequentiality of the reports by guaranteeing to another group of participants that their denunciations will not be forwarded to the government. Only 6.38% of employees denounce absence when reports do not result in any penalty for the peers. Importantly for understanding mechanisms, incentives do not backfire when moral concerns are limited through the guarantee that reports are inconsequential (the reporting rate is 12.09%). Additionally, employees who are absent according to alternative sources are more likely to be reported. Treatment conditions do not affect the accuracy of the reports. Overall, results suggest that employees report because they share the government’s objective to reduce absence, but are morally averse to being paid for harming their peers. Other explanations, such as incentives delivering information or being wrongly sized and denunciations being motivated by interpersonal disputes or lying-aversion, are not supported by experimental results or by additional survey evidence.

The seminar is co-financed by the European Union.

Full Text:  “Reporting Peers’ Wrongdoing: Experimental Evidence on the Effect of Financial Incentives on Morally Controversial Behavior”