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Screening Ethics when Honest Agents Keep their Word

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  • Ingela Alger
  • Régis Renault

Abstract

We study the implications of honesty when it requires pre-commitment. Within a two-period hidden information problem, an agent learns his match with the assigned task in period 2 and, if honest, reveals it to the principal if he has committed to it. The principal may offer a menu of contracts to screen ethics. Both honest and dishonest agents are willing to misrepresent their ethics. The principal and dishonest agents benefit from an increased likelihood of honesty as long as honesty is likely enough. Honest agents always profit from ethics uncertainty if a good match is likely. This is also true if dishonesty is likely enough, in which case an honest receives the same surplus as a dishonest.
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Suggested Citation

  • Ingela Alger & Régis Renault, 2007. "Screening Ethics when Honest Agents Keep their Word," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 291-311, February.
    • Handle: RePEc:spr:joecth:v:30:y:2007:i:2:p:291-311
    DOI: 10.1007/s00199-005-0057-3
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    Cited by:

    1. Ingela Alger & Régis Renault, 2006. "Screening Ethics When Honest Agents Care About Fairness ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 59-85, February.
    2. Schmitz, Patrick W., 2007. "Optimal selling strategies when buyers may have hard information," European Economic Review, Elsevier, vol. 51(4), pages 859-870, May.
    3. Ting Liu, 2011. "Credence Goods Markets With Conscientious And Selfish Experts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 227-244, February.
    4. Sebastian Schweighofer-Kodritsch & Roland Strausz, 2023. "Principled Mechanism Design with Evidence," Berlin School of Economics Discussion Papers 0030, Berlin School of Economics.
    5. Lang, Matthias & Schudy, Simeon, 2023. "(Dis)honesty and the value of transparency for campaign promises," European Economic Review, Elsevier, vol. 159(C).
    6. Stefano Demichelis & Jorgen W. Weibull, 2008. "Language, Meaning, and Games: A Model of Communication, Coordination, and Evolution," American Economic Review, American Economic Association, vol. 98(4), pages 1292-1311, September.
    7. Demichelis, Stefano & Weibull, Jörgen, 2006. "Efficiency, communication and honesty," SSE/EFI Working Paper Series in Economics and Finance 645, Stockholm School of Economics, revised 28 Nov 2006.
    8. Fali Huang & Peter Cappelli, 2006. "Employee Screening: Theory and Evidence," NBER Working Papers 12071, National Bureau of Economic Research, Inc.
    9. Alger, Ingela & Weibull, Jörgen W., 2016. "Morality: evolutionary foundations and policy implications," TSE Working Papers 16-702, Toulouse School of Economics (TSE).
    10. Alger Ingela & Ma Ching-to Albert & Renault Regis, 2012. "Experience Benefits and Firm Organization," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-35, September.
    11. Alexander Henke & Fahad Khalil & Jacques Lawarree, 2022. "Honest agents in a corrupt equilibrium," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 762-783, August.
    12. repec:dau:papers:123456789/12408 is not listed on IDEAS
    13. Santiago Sánchez-Pagés & Marc Vorsatz, 2009. "Enjoy the silence: an experiment on truth-telling," Experimental Economics, Springer;Economic Science Association, vol. 12(2), pages 220-241, June.
    14. Tore Ellingsen & Magnus Johannesson & Jannie Lilja & Henrik Zetterqvist, 2009. "Trust and Truth," Economic Journal, Royal Economic Society, vol. 119(534), pages 252-276, January.
      • Tore Ellingsen & Magnus Johannesson & Jannie Lilja & Henrik Zetterqvist, 2009. "Trust and Truth," Economic Journal, Royal Economic Society, vol. 119(534), pages 252-276, January.
    15. Ingela Alger & Jörgen W. Weibull, 2017. "Strategic Behavior of Moralists and Altruists," Games, MDPI, vol. 8(3), pages 1-21, September.
    16. Conley, John P. & Neilson, William, 2009. "Endogenous games and equilibrium adoption of social norms and ethical constraints," Games and Economic Behavior, Elsevier, vol. 66(2), pages 761-774, July.
    17. Janne O. Y. Chung & Sylvia H. Hsu, 2017. "The Effect of Cognitive Moral Development on Honesty in Managerial Reporting," Journal of Business Ethics, Springer, vol. 145(3), pages 563-575, October.
    18. Raymond Deneckere & Sergei Severinov, 2022. "Signalling, screening and costly misrepresentation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(3), pages 1334-1370, August.
    19. Saran, Rene, 2011. "Bilateral trading with naive traders," Games and Economic Behavior, Elsevier, vol. 72(2), pages 544-557, June.
    20. José Ignacio Rivero Wildemauwe, 2023. "Moral motivations in sequential buyer-seller interactions with adverse selection," THEMA Working Papers 2023-11, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.

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    More about this item

    Keywords

    Ethics; Honesty; Loyalty; Adverse selection; Screening; D82;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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