Social status beats money

If a lie would be bad for their image, people are more likely to ignore financial incentives

People are more honest when talking about topics involving high-status knowledge. A new study in the field of behavioral economics shows that this is true even if they have a financial incentive to lie. Questions of trust become more important in business as it becomes more and more difficult to assess statements on increasingly difficult technologies.

Trust is essential to every business relationship. Customers want honest information from the people selling them a complex high-tech product. But can they rely on what they are told? After all, a sales representative looking to earn a commission could be downplaying the disadvantages of the product.

In which situations can we trust our fellow human beings despite potential financial benefits from lying to us’ To find out, Prof. Michael Kurschilgen (Technical University of Munich and Max Planck Institute for Research on Collective Goods) and Dr. Isabel Marcin (University of Heidelberg) put approximately 190 research subjects to the test.

The participants were given multiple choice questions, for example: "In which country’s embassy did Julian Assange take refuge?" The test persons were divided into two groups: senders and receivers. With each question, the senders saw four possible answers, one of which they recommended to the receivers. The receivers saw only the question and the sender’s recommendation. While the receivers got three euros for every correct answer, the senders got the same amount every time the receiver answered incorrectly. The sender therefore had a financial incentive to lie.

For half of the participants, the test consisted of general knowledge questions on such topics as history, geography, art and politics - like the question about the Wikileaks activist Assange. The other half had questions on TV series, commercials and celebrity gossip, such as: "In what country was Irina Shayk, the ex-girlfriend of soccer star Cristiano Ronaldo, born?" In a preliminary study, Kurschilgen and Marcin identified questions in both categories to which an average of 63 percent of the participants knew the answers.

If all senders were always honest, they would therefore give correct recommendations with the same frequency for the general knowledge questions as with the other categories. However, the experiment revealed: The senders recommended the correct answers for 32 percent of the questions on TV and gossip. With the general knowledge questions, however, the truth-telling rate was 46 percent.

"When the test subjects had the opportunity to signal that they were knowledgeable in high-status areas, many of them attached more importance to their image than to the financial reward," says Michael Kurschilgen. "The experiment shows that the desire for social status can overcome financial incentives to lie." The fact that a knowledge of history, culture and politics is actually associated with a higher status than the other topics was confirmed by the research team in a supplementary study.

Identifying intrinsic factors influencing human behavior - in other words, non-material motives - is a current focus of research in behavioral economics. "Technological progress is making products and processes more complex all the time. They require extensive expert knowledge that is difficult to check. Consequently, trust is going to become more important in business life," explains Isabel Marcin. "However, financial incentives not to lie only work when the truth of a statement can be checked. It is therefore more important than ever before whether people are intrinsically motivated to be honest."

The study shows when this might be the case: "When a solid grasp of complex technologies enjoys the same or even higher status than general knowledge, it will be easier to trust the people selling us high-tech products," says Kurschilgen. "The desire for social status will then motivate them to be more honest."

Michael Kurschilgen, Isabel Marcin. Communication is more than information sharing: The role of status-relevant knowledge. Games and Economic Behavior, Volume 113 (2019). DOI: 10.1016/j.geb.2018.11.007

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