TUM Management Insights
Expertise Promotes Honesty
People are more honest when they can show off high-status expertise. In a recent article in Games and Economic Behavior, behavioral economists from Munich and Heidelberg show that people lie much less about history and literature than about yellow press gossip. This has important implications for understanding how human behavior is shaped by our image, i.e. by the concern for how we are perceived by others.
Truth is the lubricant of business relationships. As a customer, I want to rely on the salesman informing me correctly about the features of the product I am about to buy. As a manager, I want to have faith in my deputy advising me to the best of her ability before making an important decision. But how can I be confident they are being honest to me? After all, the salesman may just care about getting my money. And the deputy may just care about getting my job.
Can people’s concern for their image possibly be a safeguard against temptations to lie? Michael Kurschilgen, Professor of Managerial Economics at the TUM School of Management, and Isabel Marcin from the University of Heidelberg designed a laboratory experiment to test this question. “From interactions with friends, colleagues, family, it was pretty obvious that many people enjoy showing to others that they are knowledgeable in topics like literature, history, and geography. But it was less than clear how that desire for signalling a certain image would hold up against the desire for money,” recalls Marcin.
In a pre-study, participants could earn money by guessing the correct answer of a multiple-choice knowledge question. There were 50 “low-status” knowledge questions, about TV-series, commercials, and celebrity gossip. For example: “In which country was Irina Shayk, the ex-girlfriend of football star Cristiano Ronaldo, born? A. Brazil, B. Portugal, C: Ukraine, or D. Russia”. And there were 50 “high-status” general knowledge questions, about history, geography, politics, and art. For example: “Julian Assange fled to the embassy of which country? A. Venezuela, B. Ecuador, C. Sweden, D. Russia”. From the pre-study, the researchers selected 15 questions from the low-status set, and 15 questions from the high-status set in such a way that the average level of knowledge would be exactly the same for both categories: 63%.
In the main experiment, new participants were shown either the 15 low-status or the 15 high-status questions. This time, however, they could earn money by tricking another person into selecting a wrong answer. One player, called the sender, saw the knowledge question with the 4 answer options, just as in the first part of the study. His task was to send to another player, the receiver, a message containing just one letter: A, B, C, or D. The receiver saw the question and the message of the sender, but not the 4 answer options. For example: “Which German TV channel broadcasts the program Shopping Queen? A, B, C or D? The other player sends you the message: B.” To answer the question correctly, the receiver was thus totally dependent on receiving a correct message from the sender. But the sender had a monetary incentive to lie since he would receive 3 Euros if the receiver chose a wrong answer.
From the pre-study, Kurschilgen and Marcin knew that if all senders were honest, they would send a correct message 63% of the time, irrespective of the question being low-status or high-status. Yet in the experiment, most people did not send an honest message. For low-status questions, the share of correct messages was only 32%. In contrast, when senders could signal being knowledgeable in domains of high social status, they sent a correct message 46% of the time.
“We show that people’s concern for their image can indeed overcome material incentives to lie,” summarizes Kurschilgen. “To the participants of our experiment, certain types of knowledge clearly had a higher intrinsic value than others”. Identifying intrinsic, i.e. non-monetary drivers of behavior has been a strong focus of behavioral economics in recent years. Those non-monetary motives are particularly critical as products and processes become increasingly complex, requiring a lot of expert knowledge, which is difficult to verify.
“What we know is critical to who we are,” adds Marcin. “People care about signalling expertise in domains that affect their image.” The car dealer for instance may take pride in being an expert on cars, and therefore disclose certain shortcomings that could deter the client from buying. Because people care about their image, we have a reason to trust the salesman and the deputy as well as the scientist and the journalist.
Technical University of Munich
TUM School of Management