Unobservable Commitment and Management Control: An Experiment

21 Pages Posted: 1 Nov 2009

See all articles by Steven T. Schwartz

Steven T. Schwartz

SUNY at Binghamton - School of Management

Eric Edward Spires

Ohio State University (OSU) - Department of Accounting & Management Information Systems

David Wallin

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Richard A. Young

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Date Written: August 15, 2009

Abstract

We conduct an experiment designed to investigate unobservable commitment in a management control setting with a privately informed subordinate. The experimental setting follows closely that found in Evans, Hannan, Krishan and Moser [2001] and Rankin, Schwartz and Young [2003]. In one treatment the superior makes an unobservable, but binding commitment regarding her future behavior. In the other treatment the superior reacts to the subordinate’s actions without having made a prior commitment. In both treatments the superior sends a non-binding announcement regarding her intended response. Arguments are presented for how an unobservable commitment might affect the superior’s resolve to punish undesirable behavior by the subordinate. We find that unobservable commitment weakens the superiors’ willingness to inflict costly punishment on the subordinate and, in turn, subordinates eventually learn to be more aggressive. One possible implication is in some circumstances it may be better for superiors to let their emotions have “free rein” if their goal is to convince subordinates of their willingness to retaliate against them for their unfair behavior.

Suggested Citation

Schwartz, Steven T. and Spires, Eric Edward and Wallin, David and Young, Richard A., Unobservable Commitment and Management Control: An Experiment (August 15, 2009). Fisher College of Business Working Paper No. 1495230. Available at SSRN: https://ssrn.com/abstract=1495230 or http://dx.doi.org/10.2139/ssrn.1495230

Steven T. Schwartz

SUNY at Binghamton - School of Management ( email )

Binghamton, NY 13902-6015
United States
607-777-2102 (Phone)

Eric Edward Spires

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

David Wallin

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

Richard A. Young (Contact Author)

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States
614-292-0889 (Phone)
614-292-2118 (Fax)

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