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Kenneth Koford

Bio: Kenneth Koford is an academic researcher. The author has an hindex of 1, co-authored 1 publications receiving 67 citations.

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Journal ArticleDOI
TL;DR: In this paper, Neely et al. show that deception is part of many economic interactions and that people who make use of private information do not always do so honestly, regardless of their effect on the other party.
Abstract: Deception is part of many economic interactions. Business people, politicians, diplomats, lawyers, and students in the experimental laboratory who make use of private information do not always do so honestly. This observation indicates that behavior often rejects the moral approach to deception. As St. Augustine wrote, “To me, however, it seems certain that every lie is a sin. . . ” (St. Augustine, 421). Later, philosophers like Immanuel Kant (1787) again adopted this uncompromising moral stance when arguing against lying. At the other extreme, economic theory is built on the assumption of “homo economicus,” a figure who acts selfishly and is unconcerned about the well-being of others. An implication of this assumption is that lies will be told whenever it is beneficial for the liar, regardless of their effect on the other party. Another implication is that there is no negative outcome associated with lying per se. This assumption is very useful in many economic models. Consider contract theory, where it is assumed that without an explicit contract, neither side will fulfill its respective obligations. For example, George Akerlof’s (1970) paper on asymmetric information and the market for lemons assumes that sellers of used cars will always lie if it is in their benefit to do so. In the mechanism design literature (e.g., Bengt Holmstrom, 1979), the standard assumption is that people will tell the truth only if this is incentive-compatible given material outcomes. In the literature on tax evasion, the choice of whether to avoid paying taxes is considered a decision under uncertainty; cost is treated as a product of the probability of being caught and the cost of punishment, whereas benefit is simply the money saved by avoiding payment. However, there is no cost associated with the very act of lying (Michael Alingham and Agnar Sandmo, 1972). Another example is the game theoretic treatment of “cheap talk” (Crawford and Joel Sobel, 1982). An intermediate approach is taken by utilitarian philosophers (e.g., Jeremy Bentham, 1789). Utilitarianism prescribes that, when choosing whether to lie, one should weigh benefits against harm, and happiness against unhappiness. As Martin Luther stated, “What harm would it do, if a man told a good strong lie for the sake of the good and for the Christian church. . . a lie out of necessity, a useful lie, a helpful lie, such lies would not be against God, he would accept them.” Similarly to the economic theory approach, this type of calculation implies that lies, apart from their resultant harm and benefit, are in themselves neutral. A lie and a truthful statement that achieve the same monetary payoffs (for both sides) are considered * Graduate School of Business, University of Chicago, 5807 South Woodlawn Avenue, Chicago, IL 60637 (e-mail: uri.gneezy.gsb.uchicago.edu). I thank Douglas Bernheim and two anonymous reviewers for insightful comments that considerably improved the paper. I also thank Andreas Blume, Gary Charness, Rachel Croson, Martin Dufwenberg, Georg Kirchsteiger, David Levine, Muriel Niederle, Yuval Rottenstreich, Maurice Schweitzer, Richard Thaler, George Wu, and seminar participants at numerous universities for their comments and suggestions. Ira Leybman provided valuable help in running the experiment. I became interested in deception when my father was terminally ill and his physicians created in him a belief that they considered to be untrue. I dedicate this paper to his memory. 1 Important deviations from this assumption in economic modeling are found in Kenneth Arrow’s (1972) discussion of trust, Gary Becker’s (1976) modeling of altruistic preferences, and Akerlof’s (1982) study of the fair-wage hypothesis. For a general discussion, see Becker (1993): “The economic approach I refer to does not assume that individuals are motivated solely by selfishness or material gain. It is a method of analysis, not an assumption about particular motivations. Along with others, I have tried to pry economists away from narrow assumptions about self-interest. Behavior is driven by a much richer set of values and preferences” (p. 385). 2 Note that this does not mean that a completely selfish person will always lie. There may be strategic reasons not to lie. For example, see the David Kreps and Robert Wilson (1982) discussion of reputation and imperfect information; see also Vincent P. Crawford (2003). 3 Cited by his secretary, in a letter in Max Lenz, ed., Briefwechsel Landgraf Phillips des Grossmuthigen von Hessen mit Bucer, Vol. 1.

1,604 citations

Journal ArticleDOI
TL;DR: This paper examined the interaction effects of national culture and contextual factors (nature of the knowledge and the relationship between the knowledge sharer and recipient) on employees' tendency to share knowledge with co-workers.
Abstract: This study examines empirically the interaction effects of national culture and contextual factors (nature of the knowledge and the relationship between the knowledge sharer and recipient) on employees' tendency to share knowledge with co‐workers. Quantitative and open‐ended responses to two scenarios were collected from 142 managers (104 from the U.S. and 38 from the People's Republic of China). These two nations were selected due to their divergence on salient aspects of national culture, as well as their global political and economic importance. The focus on interaction effects was aimed at providing a more powerful test of culture's effects than simple comparisons of means typical of prior related research. Consistent with culture‐based expectation, the quantitative results indicated that Chinese vs. U.S. nationals' openness of knowledge sharing was related to their different degrees of collectivism—the relative emphasis on self vs. collective interests—as well as whether knowledge sharing involved a ...

389 citations

Journal ArticleDOI
TL;DR: This paper found that subjects often sacrifice wealth to make honest or partially honest reports, and they generally do not lie more as the payoff to lying increases, suggesting that the extent of honesty may depend on how the surplus is divided between the manager and the firm.
Abstract: This study reports the results of three experiments that examine how preferences for wealth and honesty affect managerial reporting. We find that subjects often sacrifice wealth to make honest or partially honest reports, and they generally do not lie more as the payoff to lying increases. We also find less honesty under a contract that provides a smaller share of the total surplus to the manager than under one that provides a larger share, suggesting that the extent of honesty may depend on how the surplus is divided between the manager and the firm. The optimal agency contract yields more firm profit than a contract that relies exclusively on honest reporting. However, a modified version of the optimal agency contract, which makes use of subjects' preferences for honest reporting, yields the highest firm profit. These results suggest that firms may be able to design more profitable employment contracts than those identified by conventional economic analysis.

290 citations

Journal ArticleDOI
TL;DR: The authors conducted an experiment assessing the extent to which people trade off the economic costs of truthfulness against the intrinsic costs of lying and found that preferences for truthfulness are heterogeneous among individuals.
Abstract: We conduct an experiment assessing the extent to which people trade off the economic costs of truthfulness against the intrinsic costs of lying. The results allow us to reject a type-based model. People's preferences for truthfulness do not identify them as only either "economic types" (who care only about consequences) or "ethical types" (who care only about process). Instead, we find that preferences for truthfulness are heterogeneous among individuals. Moreover, when examining possible sources of intrinsic costs of lying and their interplay with economic costs of truthfulness, we find that preferences for truthfulness are also heterogeneous within individuals.

237 citations

Journal ArticleDOI
TL;DR: The authors found that subjects often sacrifice wealth to make honest or partially honest reports, and they generally do not lie more as the payoff to lying increases, suggesting that the extent of honesty may depend on how the surplus is divided between the manager and the firm.
Abstract: This study reports the results of three experiments that examine how preferences for wealth and honesty affect managerial reporting. We find that subjects often sacrifice wealth to make honest or partially honest reports, and they generally do not lie more as the payoff to lying increases. We also find less honesty under a contract that provides a smaller share of the total surplus to the manager than under one that provides a larger share, suggesting that the extent of honesty may depend on how the surplus is divided between the manager and the firm. The optimal agency contract yields more firm profit than a contract that relies exclusively on honest reporting. However, a modified version of the optimal agency contract, which makes use of subjects' preferences for honest reporting, yields the highest firm profit. These results suggest that firms may be able to design more profitable employment contracts than those identified by conventional economic analysis.

214 citations