Ability, Expectations, and Cheating: A reference-dependent model

15:40-17:00, Wednesday, May 28, 2025

I-206, Boxue Building

Peiran JIAO is an Associate Professor of Finance at the School of Business and Economics, Maastricht University. He obtained his Ph.D. in Economics from Claremont Graduate University (CA, USA) in 2014. From 2014 to 2017, he was a Postdoctoral Research Fellow at the Department of Economics and Nuffield College, University of Oxford. Currently, he serves as an Associate Fellow at Nuffield College and co-directs the UM Behavioral Insights Centre (UM-BIC). His research focuses on behavioral and experimental finance/economics, with publications in leading journals such as the Review of Financial Studies, Management Science, Review of Economics and Statistics, and Nature Scientific Reports.

We investigate how the interplay between ability and performance expectations influences cheating behavior. We develop a theoretical model in which an agent derives utility from her performance in a given task relative to a reference point shaped by her expectations. The agent faces a trade-off between improving her performance through cheating and the increasing risk of detection and punishment. We characterize the agent’s optimal cheating decision and identify a critical auditing threshold above which cheating becomes unprofitable. Furthermore, our model predicts that cheating behavior is more likely to arise when the agent’s ability falls below her expectations. We empirically test the model’s predictions in a laboratory experiment and argue why our results have practical implications for policy design, particularly in settings where the interaction between ability and dishonest behavior is a concern, such as education, finance, and workplace environments.

For more information of the seminar, scan the following QR code(s) to join Tencent QQ group (904 544 292) or WeChat group named "IAER Seminar (4)", please.

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(QR code is valid until June 2, 2025)