Behavioral Implications of Information Systems on Disclosure Fraud

This paper uses a laboratory setting to investigate behavioral issues related to disclosure fraud. Subjects issued disclosures under one of two settings. They either knowingly issued fraudulent reports or they allowed an information system to issue fraudulent reports at a chosen rate. The settings were economically equivalent and each mechanism allowed for an implementation of the profit‐maximizing strategy. The central question is one of the relative effect of the available method of lying on the frequency of lying. The results show that when subjects were distanced from the fraud through use of an information system, they made choices that would maximize their earnings. However, making subjects more closely involved with the disclosure reduced the rate of fraudulent disclosures by 30 percent. Differences in female and male rates of fraudulent reporting waned over time.