Choosing the Wrong Pond: Social Comparisons in Negotiations That Reflect a Self-Serving Bias

Linda Babcock, Xianghong Wang and George Loewenstein

The Quarterly Journal of Economics, 1996, vol. 111, issue 1, 1-19

Abstract: We explore the role that choice of comparison groups plays in explaining impasse in teacher contract negotiations. We hypothesize that the negotiators select "comparable" districts in a biased fashion such that teachers' salaries in districts that unions view as comparable are higher than teachers' salaries in districts that school boards view as comparable. We also predict that strike activity is positively related to the difference in the salary levels of the unions' and boards' lists of comparables. We test these predictions using a unique combination of subjective survey and field data on teacher contract negotiations in Pennsylvania. Both hypotheses are supported by the data.

Date: 1996
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