Transparency and Fairness in Organizational Decisions: An Experimental Investigation Using the Paired Ultimatum Game

Jared Nai (), Reddi Kotha (), Jayanth Narayanan () and Phanish Puranam ()
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Jared Nai: Organizational Behavior and Human Resources, Singapore University, 178899 Singapore, Singapore
Reddi Kotha: Strategic Management, Singapore University, 178899 Singapore, Singapore
Jayanth Narayanan: Management and Organization, National University of Singapore, 119245 Singapore, Singapore
Phanish Puranam: Strategy, INSEAD, 138676 Singapore, Singapore

Strategy Science, 2020, vol. 5, issue 1, 55-70

Abstract: Organizations often keep secret their decisions about what employees receive (e.g., salary, budgets, benefits) to manage fairness concerns. We propose that this can be counterproductive because of a mechanism we call the “escalation of deservingness under secrecy,” where the existence of peers can inflate one’s own sense of deservingness, even when the actual allocations to peers are unknown. Building on the ultimatum game, we developed a paired ultimatum game (PUG) in which a player and a peer respondent engage with the same offeror simultaneously but with no direct competition between respondents. Across three experiments—a live interaction study as well as two scenario studies—using the PUG, we analyze the conditions under which transparency may be better than secrecy in preventing the escalation of deservingness perceptions.

Keywords: corporate strategy; decision making; managerial and organizational cognition; human resource management; governance and control; organization and management theory (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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