CHEATING IN CONTESTS

Wherever competition is used to motivate a desirable activity or productive effort it may also motivate undesirable and therefore prohibited behavior-that is, cheating-that the organizer of the contest attempts to police. For example, when workers compete for promotion, bonuses, or other rewards, they may misrepresent their output (i.e., commit fraud) or increase their output by unacceptable means (e. g., violate regulations). We show how the extent of cheating is determined by the payoffs at stake in the contest, the random component of output, probability of cheating being detected, number of contestants, and the penalty associated with being found to have cheated. We find that while greater enforcement reduces cheating, it may also reduce productive effort. We also identify how two particular aspects of enforcement, the awarding of default victories and use of correlated rather than independent audits, affect cheating behavior. (JEL J33, K42)