Is It a Lie If I Don’t Know? Mechanisms and Mitigation of Dishonesty Under Ignorance

Abstract

Ignorance of facts and laws may provide an excuse for self-serving reporting behavior, even at the risk of telling the untruth. This paper examines what decision-makers report when they do not know their true entitlement to a financial gain, why they do so, and how the resulting dilemma under ignorance can be mitigated. In a theory-guided online experiment, I show that ignorance substantially increases self-serving but potentially untruthful reporting behavior relative to a full-information benchmark. Three mechanisms – two behavioral and one institutional – drive this shift: (i) decision-makers' beliefs about their true entitlement, (ii) social norms governing reporting under ignorance, and (iii) the requirement to provide a definite statement. I evaluate two interventions: allowing information acquisition and offering a fair buyout of the unknown entitlement. Both mitigate self-serving reporting under ignorance, but the fair buyout involves a trade-off: it has the unintended side effect of increasing dishonesty among informed decision-makers.