(possibly) Ill-Gotten Gains: Disentangling The Effects of Competition and Uncertainty On Cheating

Whether people cheat more under competitive incentives schemes is a managerially important and scholarly debated issue with mixed evidence. Notably, prior work compared competitive and non-competitive schemes that were associated with different levels of uncertainty about compensation. We aim to experimentally disentangle the effect of competition from the effects of uncertainty. We conducted an incentivized, pre-registered study featuring real-time interaction between participants (N = 1,066). We introduce an uncertain non-competitive incentive scheme along with the certain non-competitive scheme and the (uncertain) competitive scheme that are typically employed in the literature. We find that competition significantly increases the magnitude (but not the prevalence) of cheating relative to both non-competitive schemes, with the effect of competition being larger when the level of uncertainty is held constant across schemes. We also find evidence that reactive egoism (believing that under competition others behave less honestly) is partially responsible for the effect of competition.