Large stakes and little honesty? Experimental evidence from a developing country.

We experimentally study the extent to which individuals are honest when lying can result in a gain of several months’ worth of income. Randomly selected individuals from villages in Bangladesh participated in a sender–receiver cheap talk game. We varied the potential benefits from providing false recommendations. While we find that individuals are more likely to provide false recommendations when stakes are very large, we still observe that almost half of the senders refrain from lying. In contrast, receivers are generally suspicious and the majority does not follow recommendations.