The Escalation of Lies: An Experimental Study of the Repeated Deception Game

Kazunori Miwa, Satoshi Taguchi and Tatsushi Yamamoto
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Kazunori Miwa: Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan
Tatsushi Yamamoto: Graduate School of Commerce, Doshisha University, Japan

No DP2019-08, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Managers' window-dressing behavior is a major concern in accounting. To prevent window dressing, it is important to clarify what situations lead people to tell lies and whether they escalate lying behaviors. We develop a lying aversion hypothesis that people tend to avoid lying, particularly when others are likely to experience serious damage from the deception, and a lying escalation hypothesis that people tell a small lie initially and escalate lying behavior subsequently, even if such escalation would eventually cause serious damage to others. Both hypotheses are supported by laboratory experiments. Our study supports the view that building internal control accounting systems is essential to prevent managers from telling lies and to identify small lies, if any, in the early stage of lying.

Keywords: Lying aversion; lying escalation; great lie; window dressing; accounting scandals (search for similar items in EconPapers)
JEL-codes: D90 M41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019-03
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