The Contagion of Unethical Behavior and Social Learning: An Experimental Study.

ABSTRACT

Unethical behavior is discovered that is more contagious than ethical behavior. This article attempts to propose one of the possible underlying mechanisms-people may have underconfidence bias in information updating due to motivated reasoning, and such bias exhibits in a different direction compared to the overconfident bias documented in the literature on ethical environment, which generate the asymmetric pattern in contagion. This study designs an experiment which relates the unethical behavior to social learning, where a series of subjects with private information about penalty decide sequentially whether to conduct unethical behavior publicly. This study adopts a quantal response equilibrium to construct a structural model for estimation of the bias. In total, 162 university students participated in our experiment and the results confirm the asymmetric patterns that people rely more on others' precedent decisions rather than their private signal; therefore, the bias facilitates the contagion. This study also tests two punishment systems in the experiment and the results suggest a policy slightly increasing penalties for the "followers" in the early stages would effectively suppress the contagion.