Abstract

http://ssrn.com/abstract=1909771
 
 

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Decision Intervention: The Effect of Assigned Social Status


Eddy Cardinaels


Tilburg University - Center and Faculty of Economics and Business Administration

Jan Bouwens


Tilburg University - Center and Faculty of Economics and Business Administration

August 15, 2011

AAA 2012 Management Accounting Section (MAS) Meeting Paper

Abstract:     
We examine whether individuals can defy their decision power if it is beneficial for them to do so. In an experiment we let principals make a decision whether to make their own investment decision, or to let their agent make that decision. While the principal can work out that the agent benefits from making the investment decision the principals would like him to make, we demonstrate that in more than 50 percent of the cases the principal rather loses money to assure that the decision she prefers is made than to let the agent make the same decision. This, however, is at odds with the real actions of the agents who select the course of actions preferred by the principal in almost 74% of the cases. We argue social status, derived from their decision authority, leads principals to prefer making their own decisions even if they have to incur a cost to follow their inclination. In addition we show that the label of 'CEO' or 'Divisional manager' does not prompt these individuals to assume this social status. It is the mere fact that they have the opportunity to make the investment decision that leads them to have low trust in the capabilities of the other party to make the same decision rendering a higher profit to all parties.

Number of Pages in PDF File: 39

Keywords: organization design, investment decisions, information asymmetry, social status

JEL Classification: D3, D81, D82, G31, L22, M4, M20, M21

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Date posted: August 15, 2011  

Suggested Citation

Cardinaels, Eddy and Bouwens, Jan, Decision Intervention: The Effect of Assigned Social Status (August 15, 2011). AAA 2012 Management Accounting Section (MAS) Meeting Paper. Available at SSRN: http://ssrn.com/abstract=1909771 or http://dx.doi.org/10.2139/ssrn.1909771

Contact Information

Eddy Cardinaels (Contact Author)
Tilburg University - Center and Faculty of Economics and Business Administration ( email )
P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
0031 13 4668231 (Phone)
0031 13 4668001 (Fax)
HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/?uid=e.cardinaels
Jan Bouwens
Tilburg University - Center and Faculty of Economics and Business Administration ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 8288 (Phone)
+31 13 466 8001 (Fax)
HOME PAGE: http://center.uvt.nl/staff/bouwens/
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