Do people make strategic commitments? Experimental evidence on strategic information avoidance

Poulsen, Anders; Roos, Michael

doi:10.1007/s10683-010-9236-6

Cited by 16 publications

(11 citation statements)

References 26 publications

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“…For example, labor union leaders aware (but, of course, not sure) that their rank-and-file members might be growing weary of a strike could publicly avoid meeting with them to credibly convey to management that the union has no intention to end the strike and that management will have to make a better offer to resolve the dispute. Lab studies have documented that people engaged in ultimatum bargaining avoid information to induce the other party to accept a proposal that they would not have accepted otherwise (Conrads and Irlenbusch 2013), and that people engaged in sequential Nash bargaining avoid information to induce the other party to propose a more generous offer than they otherwise would have (Poulsen and Roos 2010). Conrads and Irlenbusch (2013) set up a one-shot bargaining game in which a proposer can make one of two offers.…”

Section: Interpersonal Strategic Avoidancementioning

confidence: 99%

Information Avoidance

Golman

Hagmann

Loewenstein

2017

Journal of Economic Literature

561

198

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Section: Interpersonal Strategic Avoidancementioning

confidence: 99%

Information Avoidance

Golman

Hagmann

Loewenstein

2017

Journal of Economic Literature

561

198

View full text Add to dashboard Cite

“…Poulsen and Tan (2007) show that information about the acceptance threshold of one party backfires. Poulsen and Roos (2010) further document that subjects learn to avoid harmful information. In these experiments more information hurts as it weakens the bargaining position.…”

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confidence: 99%

Monitored by your friends, not your foes: Strategic ignorance and the delegation of real authority

Martinez

Sloof

Siemens

2014

Games and Economic Behavior

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In this laboratory experiment we study the use of strategic ignorance to delegate real authority within a firm. A worker can gather information on investment projects, while a manager makes the implementation decision. The manager can monitor the worker.This allows her to exploit any information gathered by the worker, but also reduces the worker's incentives to gather information in the first place. Both e↵ects are influenced by the interest alignment between manager and worker. Our data confirm the prediction that optimal monitoring depends non-monotonically on the interest alignment between managers and workers. Managers also show some preferences for control that seem to be driven by loss aversion. We also find mild evidence for hidden benefits and costs of control. However, behavioral biases have only limited e↵ects on organizational outcomes. JEL: D20, D40, D63, D82, J30In a variety of strategic situations, more information may hurt an individual. The underlying intuition is that if it is commonly known that an individual gathers more information, this may change the behavior of other individuals. This change in behavior can be detrimental to the better informed individual. Consequently, rational individuals might stay ignorant for strategic reasons. One organizational issue where strategic ignorance is likely to play an important role is the e↵ective delegation of decision rights. This argument is developed in a pioneering contribution by Aghion and Tirole (1997) and explored further in Baker, Gibbons, and Murphy (1999). In Aghion and Tirole a worker fears to be overruled by his manager if the latter is well-informed about the consequences of some operational decisions. This fear thwarts the worker's incentives to gather information. An uninformed manager can credibly commit not to overrule, since she does not know the most appropriate operational decision.Realizing that his preferred decision will be implemented, the worker has stronger incentives to gather information. Strategic ignorance can thus be a crucial tool to delegate e↵ective control over decisions -called real authority -to lower level employees.The argument is compelling from a theoretical point of view, yet empirical evidence on the underlying strategic mechanism is scarce. Moreover, practitioners, the popular business press, and many studies on monetary incentives and control indeed suggest that Aghion and Tirole might ignore important behavioral biases of both managers and workers.Regarding managers, anecdotal evidence paints the picture that many individuals are overly reluctant to delegate decision rights. The negative consequence of such preferences for control are reflected in management advice like Manzoni andBarsoux (1998) andHerzberg (2003).Rather than emphasizing the perils of lost control, this management literature warns for the negative consequences of "micromanagement." The problem of excess centralization has been discussed at least since Williamson (1996, pp.150-151) who comments on the connection between managerial meddling...

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“…Our results differ from other studies that allow individuals to choose to restrict their behavior. Poulsen and Roos () allow players in a bargaining game (Nash demand game) to first choose whether to observe others' moves before choosing their own actions and manipulate whether the other player is informed of that first choice. They find that participants overwhelmingly choose to view another's decision before taking their own action (that is, players choose not to use a commitment device).…”

Section: Results For Endogenous Commitmentmentioning

confidence: 99%

The Role of Commitment Devices in Budgeting

Schwartz

Spires

Wallin

et al. 2014

Manage. Decis. Econ.

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We administer an experiment to investigate a commitment device in the form of an unobservable commitment regarding a superior's acceptance rule for a subordinate's budget request. We find that unobservable commitment, when exogenously imposed, diminishes superiors' propensity for costly norm enforcement. The results for an endogenous treatment are similar except that those superiors who choose unobservable commitment only occasionally use the commitment device in a manner consistent with norm enforcement. Our interpretation of the results is that unobservable commitment decreases the emotional response to unfair behavior and that information asymmetry accentuates this effect.

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Do people make strategic commitments? Experimental evidence on strategic information avoidance

Abstract: Strategic commitment, Commitment, Bargaining, Strategic value of information, Physical timing effects, Endogenous timing, Experiment, C72, C78, C90, C92, D63, D80,

Cited by 16 publications

References 26 publications

Information Avoidance

Information Avoidance

Monitored by your friends, not your foes: Strategic ignorance and the delegation of real authority

The Role of Commitment Devices in Budgeting

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