Peer Effects in Unethical Behavior: Standing or Reputation?

Recent empirical evidence shows that working in an unsupervised, isolated situation under competition, can increase dishonest behavior to achieve prestige. However, could working in a common space, in the presence of colleagues affect cheating? Here, we examine how familiar-peer influence, supervision and social incentives affect worker performance and dishonest behavior. First, we show that working in the presence of peers is an effective mechanism to constrain honest/dishonest behavior compared to an isolated work situation (experiment 1). Second, we demonstrate that the mere suspicion of dishonesty from another peer is not enough to affect individual cheating behavior (experiment 2), suggesting that reputation holds great importance in a worker's self-image acting as a strong social incentives. Third, we show that when the suspicion of dishonesty increases with multiple peers behaving dishonestly, the desire to increase standing is sufficient to nudge individuals' behavior back to cheating at the same levels as isolated situations (experiment 3).