Would you lie for me? Lying behavior in a principal-agent relationship

People do not always lie for personal gain; sometimes, they lie to benefit others whom they are economically dependent on. We investigate this phenomenon in an online experiment with 1,200 Prolific participants, using a principal-agent framework. Principals design contracts that reward agents based on their reporting behavior, while agents have the opportunity to overreport in order to increase the principal’s payout. We implement three experimental treatments that vary whether agents are informed about the potential reward for overreporting or prompted to consider it before making their decision. Our findings show that most principals choose either a generous contract that is independent of the agent’s reporting behavior or a contract that rewards overreporting. While agents are generally reluctant to lie, their willingness to lie increases when the benefits of doing so are made salient or when they are forced to think about them. These results highlight how psychological framing of incentives can influence ethical behavior in economic relationships.