Abstract
We examine the effects of competition on honesty from two distinct forces: an intensive margin altering the marginal rewards to exaggeration through others' behavior; and an extensive margin, adding an outside option that selects the pool of competitors. Integrating these forces into the Fischbacher and Follmi-Heusi (2013) experimental paradigm, we use a lying and reputation cost preference model identified in Abeler et al. (2019) to predict outcomes. Matching the theory, exposure to just one of the two competitive margins does not have a large effect on honesty; however, when both are present, the result is a drastic decrease in honesty.