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May 29, 2017

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Associate Professor, Lazaridis School of Business and Economics

I am a behavioural economist. I study how individuals and firms actually make decisions. Traditional economics makes predictions about behaviour based on the assumption that individuals and firms optimize. In particular, individuals aim to be as happy as possible, while firms maximize their profits. Behavioural economists, like myself, determine in which contexts these predictions are reasonable and those in which other psychological or social factors play an important role.

The topics I have researched include large-buyer discounts; fairness in negotiations; optimal pricing to introduce a network good; methods to collude; how different forms of taxation affect consumer purchases and individual labour-supply decisions; the role of beauty in hiring decisions; mechanisms for eliciting honest reporting; how religious groups are able to achieve high levels of within-group trust and cooperation; and reasons for in-kind gift-giving.

My paper, "Clever Enough to Tell the Truth," in Experimental Economics, shows that individuals who score higher on two separate cognitive-ability tests behave more honestly in my experiment. The experiment involves participants each rolling a six-sided die privately such that no one else can observe their roll. The higher the outcome they report, the more money they receive. The main finding is that participants who score higher on the cognitive-ability tests report lower numbers on average.

I don’t really believe that smarter people are inherently more honest. In fact, to the extent that smarter people attain greater success in their careers, they have greater access to resources and power and, accordingly, more frequent occasions and larger temptations to cheat.

What explains our results, I suspect, is the nature of the private die-rolling task. The benefits from cheating (i.e., more money) are obvious to everyone, while the costs (e.g., suspicion of having cheated, eroded self-image) are not immediately apparent and require some cognitive effort to appreciate. Thus, low-intelligence types fall for the temptation to cheat and report high die outcomes, whereas high-intelligence types perceive potential costs to inflating their die report and resist cheating.

Next, I want to flip the benefits and costs to cheating in this scenario. I am now designing reporting tasks for which the cost of cheating is immediate and apparent, whereas the benefits are fuzzy and need to be thought through. I expect smarter folks will be better able to identify the benefits to cheating and therefore cheat more in such settings.

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