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Compliance in Teams - Implications of Joint Decisions and Shared Consequences

Tim Lohse and Sven Simon ()

Working Papers from Max Planck Institute for Tax Law and Public Finance

Abstract: In today's business environment, team work is omnipresent. But might teams be more prone toward non-compliance with laws and regulations than single individuals despite imminent negative consequences of uncovering misconduct? The recent prevalence of corporate delinquencies gives rise to this concern. In our laboratory experiment, we investigate the determinants of teams' compliance behavior. In particular, we disentangle the e¤ect of deciding jointly as a team of two from sharing the economic consequences among both team members. Our findings provide evidence that teams are substantially less compliant than individuals are. This drop in compliance is driven by the joint, rather than the individual, liability of team members. In contrast, whether subjects make their decisions alone or together does not influence the overall compliance rate. When coordinating their compliance decision teams predominately discuss the risk of getting caught in an audit, and team decision-making is characterized by behavioral spillovers between team members. Holding each team member fully liable is a promising means to deter them from going astray.

Keywords: Compliance; lying; team decision; shared liability; audit; communication; laboratory experiment (search for similar items in EconPapers)
JEL-codes: C92 D91 K42 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2018-05
New Economics Papers: this item is included in nep-acc, nep-cdm, nep-exp and nep-law
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Related works:
Journal Article: Compliance in teams – Implications of joint decisions and shared consequences (2021) Downloads
Working Paper: Compliance in Teams - Implications of Joint Decisions and Shared Consequences (2019) Downloads
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