Man Styles2013

Journal of Economic Behavior & Organization 88 (2013) 109 132

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Journal of Economic Behavior & Organization

j ourna l ho me pag e: www.elsev ier .com/ locate / j ebo

Other-regarding preferences and management styles

Martin G. Kochera,b,c,, Ganna Pogrebnad, Matthias Sutterb,c,e,f

a Ludwig-Maximilians-Universitt Mnchen, Department of Economics, Geschwister-Scholl-Platz 1, 80539 Munich, Germanyb University of Gothenburg, Department of Economics, Vasagatan 1, SE-40530 Gothenburg, Swedenc CESifo Munich, Poschingerstrasse 5, D-81679 Munich, Germanyd University of Shefeld, Department of Economics, 9 Mappin Street, Coventry CV4 7AL, UKe University off IZA Bonn, P.O

a r t i c l

Article history:Received 14 AReceived in re14 November Accepted 21 JaAvailable onlin

JEL classicatioC91C92D70D81

Keywords:Management sOther-regardiUnobserved hExperiment

1. Introdu

Manageminants of tseveral studcratic style (

We are grStefan Trautmthe Economic Economic ScieEuropean MeeBusiness Schosterreich, Proand the EconoTrust under th

CorresponTel.: +49 8921

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0167-2681/$ http://dx.doi.o Innsbruck, Department of Public Finance, Universitaetsstrasse 15/4, A-6020 Innsbruck, Austria. Box 7240, D-53072 Bonn, Germany

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We use a laboratory experiment to examine whether and to what extent other-regardingpreferences (efciency, inequality aversion and maximin concerns) of team managers inu-ence their management style in choice under risk. We nd that managers who preferefciency are more likely to exercise an autocratic management style by ignoring prefer-ences of their team members. Equality concerns have no signicant impact on managementstyles. Elected managers have a higher propensity than exogenously assigned managers touse a democratic management style by reaching team consensus. We also nd that malemanagers employ a democratic style more often than women.

2013 Elsevier B.V. All rights reserved.

ction

ment style and the effectiveness of interactions between managers and their subordinates are important deter-eam success in any hierarchical organization. Dependent on the way in which managers exercise their authority,ies in economics, psychology and management identify two main management styles: an autocratic and a demo-e.g., Lewin et al., 1939; Rotemberg and Saloner, 1993). While managers decisions are binding for the whole team

ateful to an associate editor and two anonymous referees for many valuable comments and suggestions. We also thank Miguel Costa-Gomes,ann, Jennifer Logg, Maria Ruiz-Martos and Amanda Goodall for insightful comments. We thank the attendees at the 2007 World Meeting ofScience Association in Rome, the 2009 International Meeting on Experimental and Behavioral Economics in Granada, the 2009 Internationalnce Association Conference in Washington and the 2009 Congress of the European Economic Association and the Econometric Societyting in Barcelona as well as the participants at research seminars at Columbia University, the London School of Economics and Aberdeenol for many helpful suggestions. We also thank the Austrian Science Foundation (Fonds zur Frderung der wissenschaftlichen Forschung inject P16617), the Ideenfonds at the University of Munich (funded by the excellence initiative), the Royal Economic Society, the Leverhulme Trustmics Department at the University of Shefeld for nancial support. Ganna Pogrebna acknowledges nancial support from The Leverhulmee Early Career Fellowship scheme.

ding author at: Ludwig-Maximilians-Universitt Mnchen, Department of Economics, Geschwister-Scholl-Platz 1, 80539 Munich, Germany.809726.ress: [email protected] (M.G. Kocher).

see front matter 2013 Elsevier B.V. All rights reserved.rg/10.1016/j.jebo.2013.01.004

110 M.G. Kocher et al. / Journal of Economic Behavior & Organization 88 (2013) 109 132

irrespective of the management style, autocratic managers allow for only a minimal team participation in the decision mak-ing process and often ignore the opinions of their subordinates (Knott, 2001). In contrast, democratic managers seek advicefrom their subordinates and try to reach consensus within their teams (e.g., Hollander, 1986; Rotemberg and Saloner, 1993).

In this paper, we explore how management styles are affected by other-regarding preferences of managers. Sincemanagers decisions have consequences for all team members, whether and to what extent managers take into accountpreferences and opinions of other team members might inuence managers decision making. Therefore, it seems straight-forward to conjecture that other-regarding preferences may have an impact on a management style. For example, managerswho are strongly motivated by efciency concerns (e.g., Charness and Rabin, 2002, 2005) are likely to be more goal-oriented.Due to this, these managers might be less inclined to consider the possible outcomes of their decisions for the other teammembers (manageme2000) may democratic

We desialternative payoffs as w

After a tefor their premembers pdecision, a rming thedecision). Werences on demograph

Our expein the folloand democrHowever, temanageme

In our exbetween anthroughout

We alsodiffer with opportunitydepartmenboards. In omanagers aall team mefor the dem

Second, the other gthe impact elicitation p

The thirdate, the litVesterlundwhere a leamanager-su

Fourth, oet al., 2007;both an indchange thedetermine team memb

1 In a more Sutter, 2012). the same decionly express trelative to the outcomes for themselves). Such managers may have a high propensity to opt for an autocraticnt style. In contrast, managers who are inequality averse (e.g., Fehr and Schmidt, 1999; Bolton and Ockenfels,be more prone to accommodate preferences of other team members. Such managers may be likely to opt for amanagement style.gn an experiment where teams of three receive a sequence of risky lottery pairs which could be thought of asrisky projects. The task of the team is to choose one lottery from each lottery pair. The lotteries yield differentell as risk coefcients for managers and the other members of the team (henceforth ordinary players).am is presented with a lottery pair choice, all team members (including the manager) have an opportunity to voteferred lottery. However, the team manager makes a nal and binding decision after having observed other teamreferences presented as the team majority decision. By choosing an alternative that contradicts the team majoritymanager makes a decision consistent with an autocratic management style (i.e., an autocratic decision). By con-

team voting result, a manager makes a decision consistent with a democratic management style (i.e., a democratice identify individual other-regarding preferences of managers and determine the impact of other-regarding pref-managers choices by controlling for these preferences in our experiment. We also explore whether individualic characteristics, motivation of managers, and team performance inuence the choice of a management style.rimental design offers a new framework for research on management styles and contributes to existing literature

wing ways. First, studies on management styles primarily concentrate on the relative comparison of autocraticatic styles by exogenously manipulating management styles as treatment variables (e.g., Van Vugt et al., 2004).am managers not only have exibility in choosing and following a particular style, but may also adopt situational

nt by switching between different styles under different circumstances.periment, management style is endogenously determined. Managers have an opportunity to choose repeatedly

autocratic and a democratic style. This allows us to examine whether managers use one style consistently the experiment or opt for situational management.

investigate whether management style depends on the way in which the manager is appointed. Organizationsrespect to how they recruit managers (e.g., CEOs or upper and mid-level managers). Sometimes teams have an

to choose managers endogenously (by voting one of the team members to be a manager). For example, academict heads are appointed primarily by the faculty vote and CEOs of several corporations are often elected by executivether cases, managers are appointed exogenously. Our experiment incorporates two treatments. In one treatment,re exogenously determined by a random draw. In the other treatment, managers are endogenously elected bymbers. Therefore, our design allows us to check whether endogenously elected managers are more likely to optocratic style than exogenously assigned managers.since the choice of a management style may depend on a managers desire to accommodate preferences ofroup members, motives other than self-interest may signicantly inuence managers decisions. By examiningof other-regarding preferences on management styles (using an extension of the Engelmann and Strobel (2004)rocedure), we bridge the literature on managerial decision making and research on other-regarding preferences.d contribution of this paper is that it explores how managers make decisions in hierarchical organizations. Toerature in economics and psychology has concentrated on important aspects of leader-follower settings (e.g.,, 2003; Potters et al., 2005, 2007; Andreoni, 2006; Komai et al., 2007; Gth et al., 2007; Gchter et al., 2008)der is essentially the rst mover rather than a manager with formal authority. In this paper, we investigatebordinate setting where managers have formal authority to make binding decisions for the whole team.ur research extends the emerging literature on how group membership inuences individual behavior (Charness

Chen and Li, 2009; Sutter, 2009).1 In our design, experimental participants select lotteries from lottery pairs inividual decision making task and in a team decision making task. This allows us to study whether participantsir individual preferences when making decisions in a team. Controlling for individual preferences allows us tothe impact of team membership on individual choices. This also gives us an opportunity to investigate whetherership affects managers and all other team members differently.

general sense, this paper is related to the literature on decision making in small teams (for reviews see Kugler et al., 2012; Charness andWhile several studies focus on decision making in a risky environment, the common approach in this literature is to allow all team memberssion power. In our experiment, the manager has formal authority to make binding decisions for the whole team, while ordinary players canheir preferences and have no further inuence on the managers decision.

M.G. Kocher et al. / Journal of Economic Behavior & Organization 88 (2013) 109 132 111

We nd that the majority of managers adopt situational management rather than consistently follow one managementstyle. While managers make democratic decisions in the majority of cases, there is a considerable heterogeneity in managersindividual propensities to make autocratic and democratic decisions. Although exogenously assigned and endogenouslyelected managers are equally likely to adopt any of the two available management styles in the aggregate, the manner inwhich managers are assigned has important implications on their behavior. Endogenously elected managers are signicantlymore likely to follow the team majority decision even when their own preference differs from the team preference. We alsond that managers make autocratic decisions more often when there is a conict between their stated preferences and thestated preferences of the majority of the team.

More importantly, we nd that other-regarding preferences inuence the choice of management style. Managers whocare about efciency are more likely to make autocratic rather than democratic decisions. Managers who report high levelsof selshness (according to a self-reported measure of other-regarding preferences) are more likely to overrule their teams.Yet, inequitmanagers wanalysis sho

The remand presentcomparisonimplication

2. The exp

2.1. Experim

Our expean additionelicit indivitask, we usthe relative

In this sThen, we pr

2.1.1. DesigWe desi

member ofplayers.3

Each lottfor managethe same loyields its hithan each oin hierarchiotherwise,

Since mafor differenthe lottery ordinary pl

Block 1: D Block 2: C Block 3: D Block 4: C

Table 1Aity of preseevery Deter

2 Sample ex3 Difference4 All lotterie

lotteries simpweighting is ley aversion does not appear to have a signicant impact on the likelihood of autocratic decisions. We also nd thatith higher levels of condence in their professional expertise are more likely to adopt an autocratic style. Ourws a gender effect: women appear more likely to make autocratic than democratic decisions compared to men.ainder of this paper is organized as follows. Section 2 describes the experimental design, laboratory proceduress our theoretical hypotheses. Section 3 presents the experimental results, obtained by means of non-parametrics as well as econometric estimations. Section 4 concludes by discussing our ndings as well as possibles.

eriment: design, procedure, and hypotheses

ental design

rimental design incorporates two main tasks: (i) an individual task and (ii) a team task. Participants also receiveal task, i.e., (iii) an other-regarding preferences elicitation procedure. In the two main experimental tasks, wedual and team preferences of participants over several pairs of risky lotteries described below. In the additionale the design of Engelmann and Strobel (2004) henceforth denoted as E&S procedure in order to determine

importance of different other-regarding motives for the behavior of experimental participants.2

ection, we rst explain the design of the lottery pairs that we have used in the two main experimental tasks.oceed by describing the individual task, the team task, and the E&S procedure.

n of experimental lotteriesgn 17 pairs of lotteries. Each lottery provides two possible monetary allocations for a team of three players. One

the team is assigned the type of the manager and the other two members are assigned the types of ordinary

ery pair offers a choice between two lotteries with different expected payoffs as well as different risk coefcientsrs and ordinary players. In other words, managers and ordinary players have different payoff schemes withinttery choice. In the majority of lotteries, the manager receives a higher payoff than ordinary players if a lotteryghest possible outcome. If the lottery provides its lowest possible outcome, the manager receives a lower payofff the ordinary players. The intuition for this is based on the system of rewards and punishments for managerscal organizations. When the work of the team produces a successful outcome, the manager is usually rewarded;the manager is punished, e.g., by being sacked.nagers and ordinary players have different payoff schemes, in each lottery pair players of different types may optt alternatives. In other words, managers and ordinary players might have opposing preferences. Table 1 showspairs used in the experiment. Dependent on potential sources of conict between preferences of managers andayers, lottery pairs in our experiment can be partitioned into four blocks:

etermination lottery pairs;onsideration lottery pairs;ivergence lottery pairs;ontrast lottery pairs.

presents Determination lottery pairs (lottery pairs 16).4 In each of these lottery pairs, both lotteries (for simplic-ntation identied in Table 1 as either A or B) yield the same expected payoff to the ordinary player. However, inmination lottery pair, lottery B has a higher risk coefcient for the ordinary player than lottery A. Risk coefcient

perimental instructions are provided in the Supplementary Material (Appendix A).s between types as well as type-assignment procedures are described in Section 2.1.3.s in our experiment offer one payoff with probability 1/3 and the other payoff with probability 2/3. Keeping the probabilities xed acrosslied the task for the participants. In addition, recent studies have found robust evidence that at these probabilities, non-linear probabilityast likely to occur (e.g., Wu et al., 2004).

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Table 1ADetermination lottery pairs (Block 1).a

Lotterypair ID

LotteryID

Teampayoff

Ordinaryplayerspayoff

Managerspayoff

Probability Expectedpayoff of thelottery forordinary player

Expectedpayoff of thelottery formanager

Absolutedifference inexpectedpayoffsbetween twolotteries forordinaryplayer

Absolutedifference inexpectedpayoffsbetween twolotteries formanager

Riskcoefcient() forordinaryplayer

Riskcoefcient() formanager

Briefdescriptionfor ordinaryplayer

Briefdescriptionfor managera

1 A 30.3 7.9 14.5 1/3 4.7 5.5 0 1 2.3 6.4 HR/SP HR/HP7.2 3.1 1 2/3

B 9.3 3.9 1.5 1/3 4.7 4.5 0.6 2.1 LR/SP LR/LP16.2 5.1 6 2/3

2 A 38.2 9.7 18.8 1/3 4.1 6.6 0 2 4.0 8.6 HR/SP HR/HP3.1 1.3 0.5 2/3

B 9.2 3.5 2.2 1/3 4.1 4.6 0.4 1.7 LR/SP LR/LP14.6 4.4 5.8 2/3

3 A 39.1 9 21.1 1/3 5.4 8.1 0 3 2.6 9.2 HR/SP HR/HP8.8 3.6 1.6 2/3

B 11.5 4.8 1.9 1/3 5.4 5.1 0.4 2.3 LR/SP LR/LP18.1 5.7 6.7 2/3

4 A 35 9 17 1/3 4.3 6.3 0 1 3.3 7.6 HR/SP HR/HP4.9 2 0.9 2/3

B 5.2 2 1.2 1/3 4.3 5.3 1.7 2.9 LR/SP LR/LP18.3 5.5 7.3 2/3

5 A 36.4 8.7 19 1/3 4.7 7.2 0 2 2.8 8.3 HR/SP HR/HP6.7 2.7 1.3 2/3

B 9.6 3.9 1.8 1/3 4.7 5.2 0.6 2.4 LR/SP LR/LP17.1 5.1 6.9 2/3

6 A 47.1 11.7 23.7 1/3 5.1 8.5 0 3 4.7 10.8 HR/SP HR/HP4.5 1.8 0.9 2/3

B 10.5 4.3 1.9 1/3 5.1 5.5 0.6 2.6 LR/SP LR/LP18.3 5.5 7.3 2/3

a Abbreviations: HR relatively high risk; LR relatively low risk; HP relatively high expected payoff; LP relatively low expected payoff; SP the same expected prot as the alternative lottery. (Experimentalparticipants receive information contained in columns 36.)


for each lottery is calculated as a standard deviation (measure of the spread) of the possible payoffs from the expectedvalue of the lottery:

=

p1 (x1 EVL)2 + p2 (x2 EVL)2 (1)where x1 and x2 are possible payoffs from the lottery L; p1 is a probability associated with payoff x1 and p2 is a probabilityassociated with payoff x2 (with p1 + p2 = 1); and EVL is expected value of the lottery L.5

At the same time, in every Determination lottery pair, lottery A yields a higher expected payoff to the manager than lotteryB. Yet, for the manager, lottery A also has a higher risk coefcient than lottery B. Therefore, in Determination lottery pairs,managers and ordinary players do not have an apparent reason to choose different alternatives if they consider expectedpayoffs of the lotteries. Managers may determine their preferred lottery in each lottery pair without taking into account thepreferencesopposing prlottery A becoefcient.

Considerpayoff fromlottery pairsafe lotterylottery A wiin Consideraif they take they may bthe same oppreferences

Divergenthe two lottreceive a hiThese diver10 is a cont

Contrastexpected pathese lotteryields differare all equa

2.1.2. IndivIn the in

Table 1. Sinscheme sepindividual torder.7

In additattitude elirelatively rivaried fromrepresents rank, the mindividual cin the team

In additiexperimentto 7 (very reconometri

5 Using stan6 Note that C

payoff but diff7 Pairwise lo8 Given that

technique for of the ordinary players since both lotteries yield the same expected payoff to the ordinary players. Nevertheless,eferences may arise from the differences in risk coefcients. In lottery pairs of this block, managers may choosecause it yields a higher expected payoff while ordinary players may opt for lottery B because it has a lower risk

ation lottery pairs are depicted in Table 1B. In each of these lottery pairs, a manager receives the same expected both lotteries but faces lower risk from choosing lottery B. Ordinary players have a different payoff structure. In

7 (8), they decide between a relatively risky lottery A (B) with a relatively high expected payoff and a relatively B (A) with a relatively low expected payoff. In lottery pair 9, ordinary players choose between a relatively riskyth a relatively low expected payoff and a relatively safe lottery with a relatively high expected payoff. Therefore,tion lottery pairs, managers and ordinary players do not have an apparent reason to opt for different alternativesinto account the expected payoff of the lotteries. Since both lotteries yield the same expected payoff to managers,e indifferent between the two alternatives. By considering ordinary players preferences, managers may choosetion as ordinary players. Similarly to the Determination lottery pairs, in lottery pairs from this block, opposing

may arise from the difference in risk coefcients.ce lottery pairs, shown in Table 1C, are structured so that the absolute differences in expected values betweeneries are equal for the ordinary players and the manager. However, in lottery pairs 11, 12 and 13, ordinary playersgher expected payoff if they choose lottery A while lottery B provides a higher expected payoff for the managers.gent expected payoffs may result in opposing preferences between managers and ordinary players. Lottery pairrol pair which yields the same expected payoffs for managers and ordinary players in both lotteries.

lottery pairs are presented in Table 1D. In every lottery pair from this block, one of the lotteries offers equalyoffs as well as individual payoffs with equal probability to both managers and ordinary players.6 Since each ofy pairs incorporates one lottery that offers equal payoffs to all members of the team and the other lottery thatent payoffs dependent on players types, we label these lottery pairs Contrast lottery pairs. Contrast lottery pairslly efcient in terms of the expected team payoffs.

idual taskdividual task, we elicit individual preferences of experimental participants over all pairs of lotteries shown ince managers and ordinary players have different payoff schemes, each participant makes choices in each payoffarately (as if she were assigned the type of a manager and the type of the ordinary player). Therefore, in theask each participant receives 34 binary lottery choices. Lottery pairs are presented to participants in a random

ion to the 34 binary lottery choices, experimental participants are exposed to the Holt and Laury (2002) riskcitation procedure (henceforth H&L procedure).8 In this procedure, participants make ten choices between asky and a relatively safe lottery. The probabilities for the different outcomes of the lotteries are systematically

0.1 to 1. The number of safe choices (i.e., the number of instances a participant opts for a relatively safe lottery)a participants elicited risk attitude rank. This rank can be used as an indicator of risk aversion; i.e., the higher theore risk averse is an individual. Using the H&L procedure allows us to reconcile risk attitude information withhoices and to determine whether individual attitudes toward risk have an impact on the behavior of managers

task.on to the incentivized H&L procedure, we also administer a non-incentivized risk attitude measure. In the post-al questionnaire, participants are asked to indicate their attitudes toward risk on a scale from 1 (very risk seeking)isk averse). Answers of the participants form the self-reported risk attitude rank. This rank is also used in thec analysis together with the elicited risk attitude rank.

dard deviation as a measure of risk is common in the nance literature.ontrast lottery pairs are qualitatively different from lottery pair 10 (Block 3), where managers and ordinary players receive the same expectederent individual payoffs in lotteries A and B.ttery choices from the individual task are provided in the Supplementary Material (Table 9 in Appendix B).

the main experimental task and the risk attitude elicitation procedure are structurally similar, the H&L procedure is the most appropriateour analysis. H&L lottery pairs are presented in the Supplementary Material (lottery pairs 1827 in Table 9 in Appendix B).

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Table 1BConsideration lottery pairs (Block 2).a

Lotterypair ID

LotteryID

Teampayoff


Managerspayoff

Probability Expectedpayoff of thelottery forordinaryplayer








7 A 25.7 7.9 9.9 1/3 4.0 3.6 1 0 2.8 4.4 HR/HP HR/SP4.5 2 0.5 2/3

B 7.7 2.9 1.9 1/3 3.0 3.6 0.1 1.2 LR/LP LR/SP10.5 3 4.5 2/3

8 A 16 4 8 1/3 3.3 4 2 0 0.5 2.8 LR/LP HR/SP8 3 2 2/3

B 16 7 2 1/3 5.3 4 1.2 1.4 HR/HP LR/SP14 4.5 5 2/3

9 A 29 6.6 15.8 1/3 3.5 6.2 3 0 2.2 6.8 HR/LP HR/SP5.2 1.9 1.4 2/3

B 23 7.3 8.4 2/3 6.5 6.2 1.2 3.1 LR/HP LR/SP11.4 4.8 1.8 1/3


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Table 1CDivergence lottery pairs (Block 3).a

Lotterypair ID

LotteryID

Teampayoff


Managerspayoff









10 A 24.3 7.7 8.9 1/3 4.6 4.6 0 0 2.2 3.0 HR/SP HR/SP8.7 3.1 2.5 2/3

B 10.7 4.3 2.1 1/3 4.6 4.6 0.2 1.8 LR/SP LR/SP15.5 4.8 5.9 2/3

11 A 27.8 8.9 10 1/3 4.0 3.8 1 1 3.5 4.4 HR/HP HR/LP3.7 1.5 0.7 2/3

B 7.8 2.9 2 1/3 3.0 4.8 0.0 2.0 LR/LP LR/HP12.2 3 6.2 2/3

12 A 30.6 10.1 10.4 1/3 5.3 4 2 2 3.4 4.5 HR/HP HR/LP6.6 2.9 0.8 2/3

B 9 3.1 2.8 1/3 3.3 6 0.1 2.3 LR/LP LR/HP14.4 3.4 7.6 2/3

13 A 31 10.2 10.6 1/3 6.7 3.9 3 3 2.5 4.7 HR/HP HR/LP10.4 4.9 0.6 2/3

B 8.2 3 2.2 1/3 3.7 6.9 0.5 3.3 LR/LP LR/HP17.3 4 9.3 2/3


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Table 1DContrast lottery pairs (Block 4).a

Lotterypair ID

LotteryID

Teampayoff


Managerspayoff









14 A 13.5 4.5 4.5 1/3 2.8 2.8 1.5 3 1.2 1.2 HR/HP LR/LP6 2 2 2/3

B 10.6 1.7 7.2 2/3 1.3 5.8 0.5 1.9 LR/LP HR/HP4.3 0.6 3.1 1/3

15 A 21 4.5 12 1/3 2.8 7.3 1.5 3 1.2 3.3 HR/LP HR/HP9 2 5 2/3

B 9 3 3 1/3 4.3 4.3 0.9 0.9 LR/HP LR/LP15 5 5 2/3

16 A 10.5 3.5 3.5 1/3 2.6 2.6 3 1.5 0.6 0.6 LR/LP HR/HP6.6 2.2 2.2 2/3

B 8.6 4.1 0.4 1/3 5.6 1.1 1.1 0.5 HR/HP LR/LP14.3 6.4 1.5 2/3

17 A 20.9 9.2 2.5 1/3 6.3 1.8 3 1.5 2.0 0.5 HR/HP LR/LP11.3 4.9 1.5 2/3

B 6 2 2 1/3 3.3 3.3 0.9 0.9 LR/LP HR/HP12 4 4 2/3

a Abbreviations: HR relatively high risk; LR relatively low risk; HP relatively high expected payoff; LP relatively low expected payoff; SP the same expected prot as the alternative lottery. (Experimentalparticipants receive information contained only in columns 36.)


One member in ateam of threeplayers becomes amanager.The manager isdetermined

EX treatment: byrandom draw;

EN treatment: bymajority voting

A team receives adecision problem(lottery pair) andall members of theteam, including themanager, cast their vote for one of the two availablealternatives(lotteries).

The manager observes MVOTE structure: the result of the

majority voting; IVOTE structure: individual vote of

each team member.and decides either to confirm (democraticdecision) or to alter (autocratic decision)the team simple majority decision. Thisdecision along with the team majoritydecision is reported to all team members.

t = 0

TIME

t = 2s - 1 t = 2s

2.1.3. TeamThe team

randomly aIn stage

on the way

In the EX In the EN

In the Ecommunicabecoming aand three vvotes. A teaafter the rsthree votin

After all problem, thindividual t

In each requested tinformationinformation

In the MVtion aboumembers

9 At the begmessages to atheir identity messages with10 Before the

revealing the a11 In the team

the Suppleme12 Simple ma

for one of the s = 0 s {1,...,17}

Fig. 1. Timeline of the team task.

task task consists of 18 stages. The timeline of the team task is provided in Fig. 1. In this task, participants are

ssigned to teams of three. Initially, each player in the team is assigned the type of the ordinary player.s = 0 at time t = 0, one of the team members becomes a manager for the whole duration of the team task. Dependent

in which a manager is determined, there are two treatments: the EX treatment and the EN treatment.

treatment, one player in each team is exogenously assigned to be a manager by a random draw. treatment, managers are determined endogenously by a simple majority vote.

N treatment, members of each team are asked to elect a manager. For this purpose, all team members cante with each other using an interactive chat.9 Any participant may propose him- or herself as a candidate for

team manager. In the EN treatment, every team has three chat periods to discuss the election of the manageroting attempts, respectively. Each chat period lasts 3 min, after which all team members submit their anonymousm member who receives two votes (i.e., a simple majority) becomes a manager. If a simple majority is not reachedt vote, the team proceeds to the next chat period. Teams that fail to determine the manager endogenously during

g attempts are assigned a manager at random.10

managers have been determined, teams receive 17 consecutive decision problems at stages s {1,. . ., 17}. In eachey choose between paired lotteries. Although these decision problems are identical to the problems used in theask, they are shown in a different order and framed differently than in the individual task.11

decision problem at stages s {1,. . ., 17} at time t = 2s 1, all three team members, including the manager, areo cast an anonymous vote for one of the lotteries in a lottery pair. At time t = 2 s the team manager alone receives about the team vote. Dependent on the content of this information, in our experimental design, we use twoal structures: the MVOTE structure and the IVOTE structure.

OTE structure, the manager is informed about the result of the majority vote. The manager receives informa-t the lottery chosen by a simple majority of the team members but not about the individual votes of all team.12

inning of the team task, participants are assigned identication names Player A, Player B or Player C, which they use in the chat. Targeted chat particular team member are not possible which prevents a possibility of forming a secret coalition. Participants are not allowed to reveal(through reporting seat number, name, gender, age, courses taken, etc.) or to use abusive language in the chat. Otherwise, the content ofin the team is unrestricted.

voting procedure, all participants are informed that the payoff schemes of managers and ordinary players are different in most cases (withoutctual lottery pairs). Please, refer to the experimental instructions in the Supplementary Material (Appendix A) for details.

task each lottery is framed as a project. A complete list of lottery pairs from the team task as well as their order of appearance is given inntary Material (Table 10 in Appendix C).jority is always reached because there are only two lotteries in each choice and three members of the team (each team member has to votelotteries).


In the structure IVOTE, the manager is informed about individual votes. The manager receives information about eachteam members vote along with the result of the simple majority vote.13

After receiving information (according to the MVOTE or the IVOTE structure), the manager has an option to either conrmthe team simple majority decision (i.e., to make a democratic decision) or to pick an alternative lottery (i.e., to make anautocratic decision). This decision is nal and determines the payoff of the entire team. After all managers have made theirnal decisions, these decisions, as well as the team majority voting results, are reported to all team members. Therefore,at the end of each of the stages s {1,. . ., 17}, ordinary players receive feedback about whether their manager has made anautocratic or a democratic nal decision. The realization of the chosen lottery is postponed until the end of the experimentin order to avoid wealth effects.

2.1.4. Other-regarding preferences elicitation procedureIn addition to the two main experimental tasks, all participants in the experiment are also subjected to the E&S other-

regarding preferences elicitation procedure. For this purpose, all participants are assigned to groups of three.14 The E&Sprocedure cgames.

In each payoff is derole of Persoallows us to

The E&S(2000) as wStrobel (20their approF&S, and Mwhat extendecisions.

2.2. Experim

We haveagement stresults obtament 2. Parin which oundings are

Overall, participantof Innsbrucor Businessthe share oexperimentexperiment

Table 2 conducted 4 individuatwo sequenTT IT Ewas alwaysparticipant

13 The mananot receive anlaboratory.14 Group com15 Engelman

where roles arroles.16 This robus17 In Experim

treatment woonsists of eleven decision situations divided into three clusters: Taxation games, Envy games and Rich and Poor

situation a monetary amount is allocated among three players: Person 1, Person 2 and Person 3. Each playerstermined based on the choice of Person 2. All participants are asked to make decisions as if they are assigned then 2. However, the roles are determined only ex post by a random draw.15 This feature of the experimental design

elicit other-regarding preferences for all participants in the experiment. procedure distinguishes between efciency concerns (EF), maximin preferences (MM), and Bolton and Ockenfelsell as Fehr and Schmidt (1999) models of inequality aversion (ERC and F&S, respectively). While Engelmann and04) provide an analysis of their data at the population level as well as at a representative agent level, we extendach by classifying participants into cohorts according to their individual other-regarding preferences (EF, ERC,M). This classication is used in our econometric analysis of the data and allows us to determine whether and tot individual other-regarding preferences of managers inuence their propensity to make autocratic and democratic

ental implementation

conducted two experiments. In Experiment 1, we explored the impact of other-regarding preferences on man-yles in EX and EN treatments with varying order of the two main tasks (i.e., individual and team tasks). Usingined in Experiment 1, we have constructed several additional variations of the experimental design in Experi-ticularly, we varied the informational structure in the team task (MVOTE versus IVOTE) and changed the orderr additional task (E&S) appears in the sequence of tasks presented to the participants. To check whether our

robust to these variations, we conducted Experiment 2.16

we conducted 18 experimental sessions: 10 sessions in Experiment 1 and 8 sessions in Experiment 2. Eighteens took part in each session, yielding a total of 324 participants. All participants were students at the Universityk. Slightly more than half of them (51.7% in Experiment 1 and 55.5% in Experiment 2) studied either Economics

Administration. The average age of participants was 23 years in Experiment 1 and 24 years in Experiment 2,f female participants was 41.6%, respectively 48.6%. The majority of participants (approximately 95% in boths) had some experience with economic experiments but none of them were subjected to the same (or a similar)al design before.provides a summary of treatments, sequences and conditions used in both experiments. In Experiment 1, we

sessions of the EX treatment and 6 sessions of the EN treatment.17 To control for order effects between the tasksl task (IT), team task (TT) and E&S other-regarding preferences elicitation procedure (E&S) we rst constructedces: IT TT E&S and TT IT E&S. In IT TT E&S, the individual task was followed by the team task. In&S, the order of the main experimental tasks was reversed. In Experiment 1, in both sequences, the E&S procedure

implemented upon completion of the two main experimental tasks. For half of the sessions in Experiment 1,s played IT TT E&S in each treatment, for the other half, participants played TT IT E&S.

ger is presented with the three identication names Player A, Player B and Player C next to these players respective votes. The manager doesy information which would allow to trace any condential characteristics of other team members and/or to identify their location in the

position in the E&S procedure is different from the team composition in the team task of the experiment.n and Strobel (2004) show that the ex post assignment of roles does not have a signicant impact on decisions. They run a control treatmente assigned ex ante and receive essentially the same pattern of other-regarding preferences as in a treatment with the ex post assignment of

tness check has been suggested to us by the associate editor and two anonymous referees.ent 1, we conducted more sessions of the EN treatment than the EX treatment to account for the possibility that some managers in the EN

uld be chosen at random due to the potential inability of several teams to elect a manager.


Table 2Conditions, treatments and sequences.a

Condition Experiment Treatment Informationb Sequence Sessions Participants Teams

EX-MVOTE-IT TT E&S 1 EX MVOTE IT TT E&S 2 36 12EX-MVOTE-TT IT E&S 1 EX MVOTE TT IT E&S 2 36 12EN-MVOTE-IT TT E&S 1 EN MVOTE IT TT E&S 3 54 18EN-MVOTE-TT IT E&S 1 EN MVOTE TT IT E&S 3 54 18EX-MVOTE-E&S IT TT 2 EX MVOTE E&S IT TT 2 36 12EN-MVOTE-E&S IT TT 2 EN MVOTE E&S IT TT 2 36 12EX-IVOTE-IT TT E&S 2 EX IVOTE IT TT E&S 2 36 12EN-IVOTE-IT

a Abbreviatiindividual votIT individual

b Informatio

In Exper(where thewith the E&and 2 sessio

Second, informationwas informin Experimet = 2 s. In Exabout indivof these seselect a man

Overall, informationsession, par

EX-MVOT EX-MVOT EN-MVOT EN-MVOT EX-MVOT EN-MVOT EX-IVOTE EN-IVOTE

Both expseparated wcalculators separately. about the pplayers of

At the edemographof individuawidely usedconsists of the First Deto strong dibe used as a

18 Results frosignicant diffconcentrated o19 The Suppl TT E&S 2 EN IVOTE IT TT E&S 2 36 12ons: MVOTE majority vote (at time t = 2s manager receives information only about the outcome of the team majority vote); IVOTE e (at time t = 2s manager receives information about individual votes of all team members and about the outcome of the team majority vote);

task; TT team task; E&S E&S procedure.n structure in the team task.

iment 2, we conducted a robustness check of our results. First, we designed an additional sequence E&S IT TT E&S procedure was followed by the individual task and the team task) in order to determine whether startingS procedure would have an impact on the participants behavior. We conducted 2 sessions of the EX treatmentns of the EN treatment using sequence E&S IT TT.

we checked whether a managers propensity to make autocratic or democratic decisions depends on the amount of this manager receives about the outcome of the team vote during the team task. In Experiment 1, each managered only about the outcome of the majority vote in the team task (information condition MVOTE). Therefore,nt 1 managers did not receive information about the voting decision of each team member separately at time

periment 2, we conducted 4 sessions where (in addition to the outcome of the team majority voting) informationidual votes of all team members is provided to the manager at time t = 2 s (information condition IVOTE). In halfsions, managers were chosen at random (EX treatment), in the other half of these sessions, teams were asked toager (EN treatment). In sessions with the information condition IVOTE, we used sequence IT TT E&S.18in the two experiments we have used the following 8 conditions which represented combinations of treatment,

structure and sequence (the detailed logic for construction of each condition is presented in Table 2). In eachticipants were subjected to only one of the 8 conditions listed below:

E-IT TT E&SE-TT IT E&SE-IT TT E&SE-TT IT E&SE-E&S IT TTE-E&S IT TT-IT TT E&S-IT TT E&S

eriments were computerized using the software z-Tree (Fischbacher, 2007). Each participant had a visuallyork space. Each work space was equipped with a personal computer, a pen and scratch paper. Built-in digitalwere available on all computer screens. Participants received a set of instructions for each experimental taskInstructions were read aloud and participants had an opportunity to re-read the instructions and ask questionsrocedure in private. To avoid possible framing effects, we used neutral language (i.e., ordinary players were calledtype and managers players of type 2).nd of both Experiment 1 and Experiment 2 participants were asked to ll out a questionnaire which includedic questions and the Machiavellian scale (henceforth the Mach scale).19 The Mach scale is a psychological measurel predisposition to guile, deceit and opportunism. The Mach scale, developed by Christie and Gies (1970) and in economics and psychology (e.g., Ahmed and Stewart, 1981; Gunnthorsdottir et al., 2002; Burks et al., 2003),20 statements based on Niccolo Machiavellis views expressed in his treatises The Prince and Discourses oncade of Titus Livius. In the Mach scale task, participants are asked to state their attitude (from strong agreementsagreement) toward each of the 20 statements on a seven-point scale. The scores obtained from this scale can

proxy of individual selshness (Vecchio and Sussmann, 1991). The reason for including the Mach scale in our

m sessions with information condition MVOTE (all sessions in Experiment 1 and 4 sessions in Experiment 2) did not reveal any statisticallyerences in behavior between different sequences (detailed results are reported in Section 3). Therefore, in information condition IVOTE wenly on sequence IT TT E&S.

ementary Material (Appendix E) presents the Mach scale questions used in the experiment.


analysis is to use this proxy as a predictor of a managers propensity to make autocratic decisions. In other words, the Machscale is our additional (self-reported) proxy of individual social preferences.

Since the level of condence may also have an impact on managers propensity to make autocratic decisions (particularly,overcondent people may have a higher predisposition to ignore others preferences), in the questionnaire we have alsoasked experimental participants to answer two condence questions. In the rst condence question, participants are askedto indicate how well they would do in a standard intelligence test versus other participants who take part in the sameexperimental session on a scale from 1 (top of the group) to 6 (bottom of the group). The other condence question has thesame logic as the rst question except it asks participants to indicate how they would do versus others if the test was in theirarea of expertise (i.e., their eld of study). We use obtained self-reported condence measures in our econometric analysis.

To avoid wealth effects, we provided payoff information only at the end of the experiment. One of the binary lotterychoices/decision problems/monetary allocation situations was selected from each experimental task at random and partici-pants receivin ExperimExperiment

2.3. Theore

One of ttask, all parmake the saHence, the idecisions induring the

The behplayers arenot have anaccording tordinary pl

Howeveby conrmimembers), players sho

Notice tthat she is ithe simple then it wou

In the tewhen her nal decisiomay emergteam task oindividual p

3. Results

We presdecisions asconsistencyThird, we cdetect facto

20 At the tim21 The data s

more details.22 Ordinary p23 Obviouslyed the payment according to their decisions. The experimental procedure took approximately 1.5 h. Participantsent 1 earned, on average, D 17.36, with a median of D 16.50 and a standard deviation of D 6.47.20 Participants in

2 earned, on average D 18.94, with a median of D 18.00 and a standard deviation of D 6.85.

tical hypotheses

he main advantages of our experimental design is the simplicity of the theoretical prediction. In the individualticipants should reveal their true preferences over a menu of presented lotteries. Furthermore, managers shouldme choices in both the individual task and the team task of the experiment when they make their nal decision.ndividual preferences over binary lottery choices from the individual task form our prediction for managers nal

the team task. Note, however, that managers have the option to refrain from revealing their true preferencesteam vote. This decision is essentially cheap talk because it has no consequences for the nal payoff.21

avior of ordinary players in the team task, however, might be different from that of the manager. If ordinary fully rational and expect that the manager is also fully rational, they know that their votes in the team task willy impact on the nal decision. In other words, in the nal decision, the manager will always choose the lotteryo her preferences without taking into account the preferences of the other members of the team. Therefore,ayers may be indifferent between the two lotteries and may cast their votes randomly.22

r, if ordinary players believe that there is a slight chance that the team manager will make a democratic decisionng the majority choice (e.g., if the manager has a preference for accommodating the decisions of the other teamthey have an incentive to reveal their true preferences over the lotteries in the team task. In this case, ordinaryuld make the same choices both in the individual task and the team task of the experiment.hat if the manager conrms the decision made by the simple majority of the team, it does not necessarily implynuenced by the information about the outcome of the voting. Particularly, if the managers vote is in line withmajority decision or if the team votes for the same lottery that the manager has chosen in the individual task,ld appear that she simply behaves according to her individual preferences.am task, we expect that managers will adopt situational management. A manager will make a democratic decisionnal decision in the team task coincides with the team majority vote and an autocratic decision when a managersn goes against the team majority vote. An agreement or a disagreement between managers and ordinary playerse in two different situations. First, ordinary players may vote for a different lottery than the manager during thef the experiment. Second, the vote of the ordinary team players in the team task may contradict the managersreferences (i.e., her choice in the individual task).23 Our empirical analysis accounts for all these possibilities.

ent the results in three sections. First, we analyze relative frequencies of making autocratic and democratic well as motives that precipitate these decisions. Second, we examine differences in other-regarding preferences,

rates across experimental tasks and risk attitudes between managers and ordinary players in all 8 conditions.onduct an econometric analysis that accounts for individual unobserved heterogeneity of managers in order tors that inuence the choice of management styles.

e of the Experiment 1, the exchange rate was D 1 = $1.56. At the time of the Experiment 2, the exchange rate was D 1 = $1.23.uggests, however, that managers make very similar decisions in the individual task and during the team vote. Please, see Section 3.2.2 for

layers decisions are very similar between the individual task and the team vote, however. Please, see Section 3.2.2 for more details., these two situations do not exclude each other.


Table 3AVoting patterns in the team task.

Managers vote = majority vote Managers vote /= majority vote Fishers exact test probabilityAll decisions 1041 (56.7) 795 (43.3)

Experiment 1 579 (56.8) 441 (43.2) 0.962Experiment 2 462 (56.6) 354 (43.4)

EX treatment 481(58.9) 335 (41.1) 0.088EN treatment 560 (54.9) 460 (45.1)

Assigned managers 567 (56.5) 436 (43.5) 0.887Elected managers 474 (56.9) 359 (43.1)

MVOTE 811 (56.8) 617 (43.2) 0.910IVOTE 230 (56.4) 178 (43.6)

IT TT 744 (56.1) 582 (43.9) 0.430TT IT 297 (58.2) 213 (41.8)E&S beginning 809 (56.7) 619 (43.3) 0.955E&S end 232 (56.9) 176 (43.1)

3.1. Autocratic versus democratic management style

3.1.1. DecisionsOur dataset consists of decisions made by 108 managers and 216 ordinary players across the two experiments (324

participanttreatment. during the (18%) becauteams manbehavior indecisions in

During ttheir team iHowever, m1182 cases for a differe

Table 3Ashows manstyle. TableMVOTE and(all differen

The sharour experimwith the ou

Table 3BAutocratic and

All decisions

Experiment Experiment

EX treatmenEN treatmen

Assigned maElected man

MVOTE IVOTE

IT TTTT ITE&S beginniE&S ends in total). In the two experiments, 48 teams (44.4%) took part in the EX treatment and 60 (55.5%) in the ENIn the EN treatment, 42 teams (70%) have elected a manager during the rst voting attempt, 6 teams (10%) second attempt, and one team (2%) during the third attempt. Managers were assigned at random in 11 teamsse they failed to elect a manager during three voting attempts. Overall, across the two experiments, in 59 (48 + 11)agers were assigned and in 49 (42 + 6 + 1) teams managers were elected. In this section we consider the voting

different experimental conditions and then analyze managers propensities to make autocratic and democratic different experimental conditions.he team vote, managers in both experiments vote for a different alternative than both of the ordinary players inn 795 cases (43.3%) and for the same alternative as at least one ordinary player in their team in 1041 cases (56.7%).anagers in both experiments make autocratic nal decisions in 654 cases (35.6%) and democratic decisions in

(64.3%). The fact that the number of autocratic decisions is lower than the number of cases when managers optnt lottery than the rest of the team suggests that managers may be affected by the results of the team vote.

provides a summary of the voting behavior in the team task in different experimental conditions and Table 3Bagers choices to conrm or to alter the team majority decision by adopting either a democratic or an autocratic

3A shows that voting patterns are very similar across Experiment 1 and Experiment 2, EX and EN treatments, IVOTE conditions, different sequences of experimental tasks, as well as among assigned and elected managersces are not statistically signicant according to the Fishers exact test).e of cases when the managers vote contradicts the outcome of the team majority vote in different variations ofental design ranges from 41.1% to 45.1%. At the same time, the share of cases when the managers vote coincidestcome of the team majority vote lies between 54.9% and 58.9%. Results of the KruskalWallis test do not reveal

democratic decisions.

Autocratic (%) Democratic (%) Fishers exact test probability 654 (35.6) 1182 (64.4)

1 370 (36.3) 650 (63.7) 0.5242 284 (34.8) 532 (65.2)

t 296 (36.3) 520 (63.7) 0.624t 358 (35.1) 662(64.9)

nagers 384 (38.3) 619 (61.7) 0.009agers 270 (32.4) 563 (67.6)

505 (35.4) 923 (64.6) 0.682149 (36.5) 259 (63.5)

481 (36.3) 845 (63.7) 0.953173 (33.9) 337 (66.1)

ng 519 (36.3) 909 (63.7) 0.241135 (33.1) 273 (66.9)


0 0.2 0.4 0.6 0.8 1

1

3

5

7

9

Frequency

ID o

r bl

ock

ID

any statisti2.2, either. two experim

In Expermanagers mand Fisherssignicantl(identied not nd stathe EX andIT precedesTable 3B fo

Even thodecisions bmanagers yin 270 casesmore oftenmanagers i36.3% and 4shares of auin the EN trmore oftenassigned m

Fig. 2 suas across blin most of t2 (Consideradecisions ar

Overall, potential co(66.0%) numconict of i

24 We have cno statistically25 Fishers ex

(p = 0.055). Fis11

13

15

17

block 2

block 4

Lott

ery

pair

autocratic democratic

Fig. 2. Autocratic and democratic decisions by lottery pair and block.

cally signicant differences in voting behavior across the 8 different experimental conditions listed in SectionSince voting behavior is essentially the same across different experimental conditions, we pool data from theents to conduct our analysis of managerial decisions.24

iment 1, managers made autocratic decisions in 36.3% of cases (370 decisions out of 1020). In Experiment 2,ade autocratic decisions in 34.8% of cases (284 decisions out of 816). Results of the chi-squared test (p = 0.51)

exact test (p = 0.52) show that the proportions of autocratic decisions in the two experiments are not statisticallyy different from each other. Furthermore, the shares of autocratic decisions in the 8 conditions of the experimentin Table 2) are not statistically signicantly different from each other (KruskalWallis test p = 0.29). We also dotistically signicant differences in the propensities of managers to make autocratic and democratic decisions in

the EN treatment, in the MVOTE and the IVOTE informational structures of the team task, in sequences where TT and TT precedes IT as well as in experimental sequences which begin and end with the E&S procedure (seer details).ugh we do not nd statistically signicant differences between the propensity to make autocratic and democraticetween managers in the EX and the EN treatments (see Table 3B), comparison between assigned and electedields a different result. Assigned managers make autocratic decisions in 384 cases (38.3%) and elected managers

(32.4%). Fishers exact test shows that assigned managers resort to autocratic decisions statistically signicantly than elected managers (p = 0.009). Furthermore, elected managers in the EN treatment, exogenously assignedn the EX treatment and exogenously assigned managers in the EN treatment make autocratic decisions in 32.4%,

7.1% of cases, correspondingly. According to the results of a set of Fisher exact tests, the differences between thetocratic decisions among these three clusters of managers are statistically signicant.25 Hence, elected managerseatment are least likely to make autocratic decisions. Managers in the EX treatment make autocratic decisions

than elected managers in the EN treatment but less often than assigned managers in the EN treatment. Finally,anagers in the EN treatment are most likely to exercise the autocratic management style.mmarizes the frequencies of autocratic and democratic decisions across all 17 experimental lottery pairs as wellocks of lottery pairs. Autocratic decisions exceed 10% of cases in all lottery pairs but remain below 50% of caseshe lottery pairs (ID 1 through ID 12 in Fig. 2). According to Fig. 2, in Block 1 (Determination lottery pairs), Blocktion lottery pairs), Block 3 (Divergence lottery pairs) and Block 4 (Contrast lottery pairs) the shares of autocratice 24.5%, 15.4%, 37.0% and 66.0% respectively.the lowest number of autocratic decisions (15.4%) is observed in Block 2 (Consideration lottery pairs) where thenict of interest between the manager and ordinary players is relatively small. At the same time, the highestber of autocratic decisions is observed in Block 4 (Contrast lottery pairs) where the propensity to observe a

nterest between the manager and ordinary players is very high. Therefore, our experimental design creates sig-

onducted a large number of tests comparing various characteristics of participants in Experiment 1 and Experiment 2. All these tests revealed signicant differences.act test suggests that the difference between the proportion of autocratic decisions in the EX and the EN treatment is marginally signicanthers exact test probabilities for all other comparisons are less than 0.001.


10

12

14

16

anag

ers

nicant varpropensity are likely to

There is depicts the made demoone autocramanagers athe experim

3.1.2. InformIn our ex

receive infocondition, mabout indiva different managers cordinary plqualitativelto make au

In the Mof autocratito make autthat the inf

In the IV

(a) when al(b) when th

lottery;(c) when th

In the Mthe IVOTE cfrom the temajority vomanagers mrespectively

In situatcorrespondcondition, s(b) and (c), propensity managers a(all Fishersautocratic o0

2

4

6

8

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 N

um

ber

of m

Number of autocratic decisions per manage r

Fig. 3. Autocratic and democratic decisions by manager.

iability in conicts of interest between managers and ordinary players which allows us to investigate a managersto make autocratic and democratic decisions in a wide variety of situations (when managers and ordinary players

generally agree and generally disagree).considerable individual heterogeneity in managers propensity to make autocratic and democratic decisions. Fig. 3number of autocratic decisions per manager versus the number of managers. Only 3 managers (2.8%) have alwayscratic decisions and never resorted to autocratic decisions. All other 105 managers (97.2%) have made at leasttic decision. The highest number of autocratic decisions is 14 out of 17. This suggests that individual proles ofre consistent with situational management, i.e., managers use both autocratic and democratic decisions duringent. However, the majority of managers have made more democratic decisions than autocratic decisions.

ation structureperiment, we use two different information conditions: MVOTE and IVOTE. In the MVOTE condition managersrmation only about the outcome of the team majority vote before they make their nal decisions. In the IVOTEanagers receive not only information about the outcome of the majority vote but also detailed information

idual votes of all team members. Therefore, in the MVOTE condition, a manager knows that she has voted forlottery than other team members if and only if both ordinary players have made choices which contradict thehoice. In the IVOTE condition, a manager knows all individual votes, i.e., she can see whether any one of theayers has opted for a lottery which does not coincide with the managers choice. The nature of information isy different in both conditions (MVOTE and IVOTE). This difference may have an effect on managers propensitytocratic decisions.VOTE condition, managers make autocratic decisions in 35.4% of cases; whereas in the IVOTE condition, the sharec decisions is equal to 36.5%. According to the WilcoxonMannWhitney test, the difference in the propensityocratic decisions in the MVOTE and the IVOTE conditions is not statistically signicant (p = 0.667). This suggestsormation condition does not inuence the choice of a management style.OTE condition, a manager can distinguish between three situations in the team vote:

l team members (manager and both ordinary players) vote for the same lottery;e manager and one ordinary player vote for the same lottery and another ordinary player votes for a different

e manager votes for one lottery and both ordinary players vote for a different lottery.

VOTE condition, a manager can observe situation (c) but cannot distinguish between situations (a) and (b). Inondition, a managers vote coincides with the majority vote (situations (a) and (b)) in 56.4% of cases and differsam vote (situation (c)) in 43.6% of cases. Similarly, in the MVOTE condition, a managers choice is the same as the

te (situation (a) and (b)) in 56.8% of cases and different (situation (c)) in 43.2% of cases. In situations (a) and (b)ake autocratic decisions in 7.8% of cases and in 5.3% of cases in the IVOTE condition and the MVOTE condition,. This difference between conditions is not statistically signicant (Fishers exact test p = 0.103).ion (c), managers make autocratic decisions in the IVOTE and the MVOTE in 73.6% of cases and 74.9% of casesingly. This difference between conditions is not statistically signicant (Fishers exact test p = 0.399). In the IVOTEituation (a) is observed in 31.1%, situation (b) in 25.2%, and situation (c) in 43.6% of decisions. In situations (a),managers make autocratic decisions in 9.4%, 5.8% and 73.6%, correspondingly. While the difference between theto observe autocratic decisions in situations (a) and (b) is not statistically signicant (Fishers exact test p = 0.222),re statistically signicantly more likely to make autocratic decisions in situation (c) than in situations (a) or (b)

exact test probabilities are lower than 0.001). Overall, our results suggest that managers decisions to resort tor democratic style do not depend on the nature of information they receive after the team vote.


Table 4Decisions by motive.a

Team vote scenario Outcome of the teammajority vote

Managers nal decision

A B

All three team members unanimously vote for lottery A A Consensus decision Power decisionAll three team members unanimously vote for lottery B B Power decision Consensus decisionManager and one of the ordinary players vote for lottery A, the other

ordinary player votes for lottery BA Consensus decision Power decision

Manager and one of the ordinary players vote for lottery B, the otherordinary player votes for lottery A

B Power decision Consensus decision

Both ordinary players vote for lottery A, manager votes for lottery B A Conformist decision Dissent decisionBoth ordinary players vote for lottery B, manager votes for lottery A B Dissent decision Conformist decision

a Note that when a managa manager can

3.1.3. MotivIn order

these two cwithin the cthan both oteam) and, the lottery have votedthe managethe ordinardifferent althe majoritnal decisio

Within dations whenal decisiomajority vomanager th

Conformthe results omay opt forplayers havvote. A sum

Table 5 sdissent, powTable 5A rechoices relaby motive (and power d(for dissent

Accordindissent deciWhile the rtion 2.3, ware also of cross-exper

26 In the MVOinformation ab27 While pow

the team votedecisions mancontradicted tvote stage as cdecisions are iin the MVOTE condition, a manager cannot distinguish between scenarios when all team members vote for the same lottery and scenarioser and one of the ordinary players vote for the same lottery and the other ordinary player votes for a different lottery. In the IVOTE condition,

distinguish between all scenarios.

es to distinguish among different motives behind autocratic and democratic decisions, the decisions within each ofategories are partitioned into two subcategories. We distinguish between dissent decisions and power decisionsategory of autocratic decisions. Dissent decisions refer to situations when the manager votes for a different optionrdinary team members during the team vote (i.e., the managers vote is at odds with the majority vote of theas a result, makes a nal decision contrary to the team. For example, during the team vote, a manager may opt forA. The manager then observes that the result of the majority vote is B (which means that both ordinary players

for the lottery B) but, nevertheless, chooses lottery A in her nal decision. Power decisions describe cases whenrs vote coincides with the majority vote outcome (i.e., the manager votes for the same lottery as at least one ofy players in the team) however, after observing the result of the majority vote, changes her mind and opts for aternative. For example, a manager chooses lottery A during the team vote and then observes that the result ofy vote is A.26 However, after observing the result of the majority vote, the manager opts for the lottery B in hern.27

emocratic decisions, we identify consensus decisions and conformist decisions. Consensus decisions depict situ-n the managers vote coincides with the majority vote and the manager conrms the team majority vote in then. For example, a manager votes for the lottery A during the team vote and then observes that the result of thete is A (which means that the manager has cast the same vote as at least one ordinary player in the team). Theen conrms the majority decision to choose lottery A in her nal decision.ist decisions identify cases when the managers vote contradicts the team majority vote; however, after observingf the team vote, the manager conrms the team majority decision. For example, during the team vote, a manager

the lottery A. The manager then observes that the result of the majority vote is B (which means that both ordinarye voted for the lottery B). The manager then chooses lottery B in her nal decision even though it contradicts hermary of motives dependent on the possible actions of the manager and ordinary players is given in Table 4.hows the absolute and relative frequencies of autocratic and democratic decisions partitioned into four categories:er, consensus and conformist decisions respectively. These frequencies can be summarized in two different ways.ports the number of choices made according to each of the four motives as well as the share (percentage) of thesetive to the total number (1836) of nal decisions made by the managers. Table 5B provides the summary statistic1) relative to the number of cases when the managers vote coincides with the team majority vote (for consensusecisions); and (2) relative to the number of cases when the managers vote differs from the team majority voteand conformist decisions).g to Table 5A, a slight majority of decisions (53.4%) are consensus decisions. In 32.3% of cases, managers makesions. Conformist decisions are observed in 11.0% of cases, and managers make power decisions in 3.3% of cases.easoning behind dissent and consensus decisions is clear and consistent with our theoretical hypotheses in Sec-

e are particularly interested in the characteristics and determinants of conformist decisions. Power decisionsinterest because they represent a deviation from a managers team vote. We conduct a series of within- andiment, within- and cross-treatment and within- and cross-sequence non-parametric comparisons to determine

TE condition this may mean that either one or two ordinary players have voted for the lottery A. In the IVOTE condition the manager receivedout the number of the ordinary players who opted for the same lottery.er decisions may seem irrational, this is not necessarily the case because in our experimental setting managers may regard their vote during

in the team task as cheap talk and therefore, may randomize between two available alternatives (see Section 2.3). Hence, by making poweragers do not necessarily contradict their previous choices. In our dataset, managers who make power decisions voted for an alternative whichheir choice in the individual task in 37 cases (60.7%). This may be interpreted either as evidence that managers do indeed treat the teamheap talk or may suggest that this inconsistency is due to error. At the same time, 24 nal decisions (39.3%) of managers who made powernconsistent with their choices in the individual task. This may suggest that 39.3% of power decisions are due to the lack of rationality or error.


Table 5AAutocratic and democratic decisions by motive (all cases).

Autocratic decisions Democratic decisions

Dissent (%) Power (%) Consensus (%) Conformist (%)

All decisions 593 (32.3) 61 (3.3) 980 (53.4) 202 (11.0)

Experiment 1 337 (33.0) 33 (3.3) 546 (53.5) 104 (10.2)Experiment 2 256 (31.4) 28 (3.4) 434 (53.2) 98 (12.0)

EX treatment 261 (32.0) 35 (4.3)* 446 (54.7) 74 (9.1)*

EN treatment 332 (32.6) 26 (2.5)* 534 (52.4) 128 (12.6)*

Assigned managers 344 (34.3) 40 (4.0)* 527 (52.5) 92 (9.2)*

Elected managers 249 (29.9) 21 (2.5)* 453 (54.4) 110 (13.2)*

MVOTE 462 (32.4) 43 (3.0) 768 (53.8) 155 (10.9)IVOTE 131 (32.1) 18 (4.4) 212 (52.0) 47 (11.5)

IT TT 430 (32.4) 51 (3.8)* 693 (52.3) 152 (11.5)TT IT 163 (32.0) 10 (2.0)* 287 (56.3) 50 (9.8)E&S beginning 468 (32.8) 51 (3.6) 758 (53.1) 151 (10.6)E&S end 125 (30.6) 10 (2.5) 222 (54.4) 51 (12.5)

* Difference between proportions is statistically signicant according to the Fishers exact test (p < 0.05).

whether the propensity to observe conformist and power decisions depends on the variation in the experiment, treatment,informational structure or sequence of tasks.

Our results indicate that the way in which managers are appointed has a strong inuence on their propensity to take theopinion of the other team members into account (see Table 5A). Managers are more likely to make conformist decisions in theEN treatmeFurthermor(13.2%) (Fisabout the m

Table 5Ain the EN tre(4.0%) is higsignicant elected man

Accordinteam task (whereas in test p = 0.02receive aboconrmed i

Table 5BAutocratic and

All decisions

Experiment Experiment

EX treatmenEN treatmen

Assigned maElected man

MVOTEIVOTE

IT TT TT IT E&S beginniE&S end

* Differencent (12.6%) than in the EX treatment (9.1%). This difference is statistically signicant (Fishers exact test p = 0.0011).e, assigned managers (9.2%) make statistically signicantly fewer conformist decisions than elected managershers exact test p = 0.004). The order of experimental tasks and the nature of information which managers receiveajority vote do not inuence the propensity to observe conformist decisions.

also shows that managers are signicantly more likely to make power decisions in the EX treatment (4.3%) thanatment (2.5%) (Fishers exact test p = 0.027). Moreover, the share of power decisions made by assigned managersher than the share of power decisions made by elected managers (2.5%). This difference is weakly statistically

(Fishers exact test p = 0.052) These results suggest that exogenously assigned managers are more likely thanagers to change their mind after they have voted with the rest of the team for the same plan of action.g to Table 5A, the propensity to observe power decisions is higher in sequences when the individual task precedes

IT TT) compared to the reverse sequence (TT IT). In IT TT managers make power decisions in 3.8% of casesTT IT managers make power decisions in 2.0% of cases. This difference is statistically signicant (Fishers exact6). Yet, neither the relative positioning of the E&S procedure nor the nature of information which managersut the majority vote inuence the propensity to observe power decisions. All results reported in Table 5A are alson Table 5B.

democratic decisions by motive (cases where autocratic and democratic decisions are possible).

Managers vote = majority vote (1041 cases) Managers vote /= majority vote (795 cases)Consensus (%) Power (%) Dissent (%) Conformist (%)

980 (94.1) 61 (5.9) 593 (74.6) 202 (25.4)

1 546 (94.3) 33 (5.7) 337 (76.4) 104 (23.6)2 434 (93.9) 28 (6.1) 256 (72.3) 98 (27.7)

t 446 (92.7) 35 (7.3)* 261 (77.9) 74 (22.1)*

t 534 (95.4) 26 (4.6)* 332 (72.2) 128 (27.8)*

nagers 527 (92.9) 40 (7.1)* 344 (78.9) 92 (21.1)*

agers 453 (95.6) 21 (4.4)* 249 (69.4) 110 (30.6)*

768 (94.7) 43 (5.3) 462 (74.9) 155 (25.1)212 (92.2) 18 (7.8) 131 (73.6) 47 (26.4)

693 (93.2) 51 (6.9)* 430 (73.9) 152 (26.1)287 (96.6) 10 (3.4)* 163 (76.5) 50 (23.5)

ng 758 (93.7) 51 (6.3) 468 (75.6) 151 (24.4)222 (95.7) 10 (4.3) 125 (71.0) 51 (29.0)

between proportions is statistically signicant according to the Fishers exact test (p < 0.05).


Table 6Individual other-regarding preferences, derived from the E&S procedure.

All players (%) Ordinary players (%) Managers (%) Fishers exact test probability

EF 137 (42.3) 94 (43.5) 43 (39.8) 0.552ERC 11 (3.4) 9 (4.2) 2 (1.9) 0.348F&S 8 (2.5) 4 (2.0) 4 (3.7) 0.448MM 119(36.7) 81 (37.5) 38 (35.2) 0.715Mixture 34 (10.5) 22 (10.2) 12 (11.1) 0.848None 15 (4.6) 6 (2.8) 9 (8.3) 0.045

Total 324 (100) 216 (66.7) 108 (33.3)

3.2. Characteristics of managers and ordinary players

Before proceeding to the econometric estimation in Section 3.3, we classify managers with respect to their other-regardingpreferences, their consistency in making repeated choices and their risk attitudes. These classications will be useful inestimating the determinants of autocratic versus democratic decisions in Section 3.3. We can also employ these classicationsto show that the characteristics of managers are not signicantly different across treatments and that ordinary players andmanagers h

3.2.1. OtherWe use

E&S proceIn the a

of the E&SThe E&S of moneysometimeother woconsisten

We looof choicehas madeor MM cothan one participanis assignein our exp

Accorditent withare assignassigned either ERCtions of mor MM (prank test EF concer

28 At the popbrief discussio29 All decisio

D). For exampF&S and MM iother concernis consistent wconsistent wit30 Note that

Schmidt (199931 A higher p

15 participantable to investiave, in general, similar characteristics.

-regarding preferencestwo measures of other-regarding preferences: the incentivized E&S procedure and the self-reported Mach scale.

duredditional experimental task (see Section 2.1.4), all participants take part in the E&S procedure.28 Using the results

procedure, we construct a measure of individual other-regarding preferences by using a simple threshold rule.procedure consists of 11 decision situations. Every situation offers a choice among three possible allocations

(A, B, or C). Each of the four other-regarding preference concerns (EF, ERC, F&S or MM) predicts only one (or,s two) monetary allocation(s) which is (are) often different from allocation(s) predicted by other concerns. Inrds, by observing a choice of an experimental participant, it is possible to determine whether this choice ist with a particular other-regarding concern (EF, ERC, F&S or MM).29

k at the choices made by participants in all 11 decision situations in the E&S procedure and count the numbers consistent with EF, ERC, F&S, MM concerns. If in more than half of all decision situations (6) a participant

choices consistent with either EF, ERC, F&S, or MM concerns, this participant is assigned to the EF, ERC, F&Short respectively. If in at least 6 decision situations a participant has chosen allocations consistent with moreother-regarding concern, this participant is assigned to the Mixture cohort. If in 6 or more decision situations at has chosen allocations which are not consistent with any of the four other-regarding concerns, this participantd to the None cohort. The summary of individual other-regarding preferences of managers and ordinary playerseriment (constructed according to the threshold E&S measure described above) is provided in Table 6.ng to our individual measure, more than half of the experimental participants (84.9%) make decisions consis-

only one other-regarding preference concern. 42.3% of participants are classied as efciency-oriented. Theyed to the EF cohort. At the same time, 36.7% of participants appear to maximize the minimum payoff. They areto the MM cohort. The share of participants classied as inequality averse, whose decisions are consistent with

(3.4%) or F&S (2.5%), is relatively small.30 A series of Fisher exact tests (reported in Table 6) shows that the propor-anagers and ordinary players who exhibit behavior consistent with EF (p = 0.552), ERC (p = 0.348), F&S (p = 0.448)

= 0.715) are not signicantly different.31 Moreover, according to the KruskalWallis equality-of-populationswith 7 degrees of freedom, the propensity to observe managers (p = 0.469) and ordinary players (p = 0.120) withns and managers (0.147) and ordinary players (0.197) with MM concerns is very similar in all 8 experimental

ulation/representative agent level, our results are consistent with the ndings of Engelmann and Strobel (2004). These results, along with an, are provided in the Supplementary Material (Appendix D).n situations, along with the respective EF, ERC, F&S and MM predictions, are provided in the Supplementary Material (Table 11 in Appendixle, according to Table 11 (Appendix D in the Supplementary Material) a participants behavior is consistent with EF and inconsistent with ERC,

f she opts for allocation A in situation Ey in Rich and Poor games. A participants behavior is consistent with ERC and inconsistent with any

if she chooses allocation C in situations F and Fx in Taxation games and allocation B in any of the four Envy games. A participants behaviorith F&S and inconsistent with any other concern if she selects allocation C in situations N and Nx in Envy games. A participants behavior ish MM and not with any other concern if she opts for allocation B in situation P in Rich and Poor games.this result does not necessarily suggest that the data provide little support for the models of Bolton and Ockenfels (2000) and Fehr and) because participants in the Mixture cohort often make decisions consistent with ERC or F&S along with other concerns.roportion of managers (8.3%) than ordinary players (2.8%) are assigned to the None cohort (Fishers exact test p = 0.045). However, since onlys (6 ordinary players and 9 managers) were assigned to the None cohort, there seems to be too few observations in this cohort for us to begate why this is the case.


Fig. 4. Inconstask and nal task; VOTE-FINinconsistencieteam task.

conditionother-regacross ex

Mach scaIn addi

managershigh leveour econo

The data(Wilcoxonbetween 67Mach scoreMach scorescores betwwell as assitreatment (

3.2.2. ConsiRecall fr

lottery pairthe team taplayers makdecisions absummary o

In Fig. 4,lottery pairversus nal

The datathe inconsisteam vote inand ordinarvote. Since inconsisten

32 Due to thecould not cond33 We have c

and the Mach 34 ALL is the s

chosen the sama decision is cmanagers.istencies in decisions in individual and team tasks. Abbreviations: IND-FIN inconsistencies between managers decisions in the individualdecisions in the team task; IND-VOTE inconsistencies between decisions in the individual task and decisions during the vote in the team

inconsistencies between managers decisions during the vote in the team task and nal decisions in the team task; ALL managerss throughout the experiment: between decisions in the individual task, decisions during the vote in the team task and nal decisions in the

s (see Table 2).32 These results suggest that (a) managers and ordinary players in our experiment exhibit similararding preferences and (b) participants are relatively homogeneous in terms of their other-regarding preferencesperimental treatments.letion to the E&S procedure, we use the Mach scale (described in Section 2.2) in order to determine whether

who report high levels of selshness are more likely to make autocratic decisions than managers who reportls of altruism. We use the individual Mach score (obtained using the Mach scale) as an explanatory variable inmetric analysis.

suggest that there are no signicant differences in the Mach scores between ordinary players and managersMannWhitney test p = 0.362). Scores range between 65 and 138 (with the median of 91) for ordinary players and

and 130 (with the median of 94) for managers. Managers in the EX and the EN treatment are very similar in theirs (WilcoxonMannWhitney test p = 0.865). Ordinary players in the EX and the EN treatment also have similars (WilcoxonMannWhitney test p = 0.362). Furthermore, there are no statistically signicant differences in Macheen elected managers and assigned managers in both treatments (WilcoxonMannWhitney test p = 0.602) asgned managers in the EX treatment, assigned managers in the EN treatment and elected managers in the ENKruskalWallis test p = 0.792).33

stency of decisions between individual and team tasksom our experimental design (see Section 2.1) that managers make decisions about their preferred lottery in each

at three different points in time during the experiment: (a) in the individual task; (b) during the team vote insk; and (c) when making their nal decisions after observing the outcome of the team majority vote. Ordinarye decisions over the same lottery pairs in the individual task and during the team vote in the team task. Repeatedout the same lottery pairs allow examining an individuals degree of inconsistency across experimental tasks. A

f such inconsistencies is provided in Fig. 4. IND-VOTE shows the percentage of inconsistent decisions between the individual task and the team vote in alls both for ordinary players and managers. VOTE-FIN (team vote versus nal decision), IND-FIN (individual task

decision) and ALL (inconsistency throughout the experiment34) are constructed only for managers. suggest that managers and ordinary players decisions are very similar when they are compared according to

tency criterion. Managers and ordinary players make inconsistent decisions between the individual task and the

27.5% and 23.8% of cases respectively. According to the Wilcoxon sign-rank test, managers decisions (p = 0.593)y players decisions (p = 0.251) are not statistically signicantly different between the individual task and the teammanagers may not always reveal their true preferences during the team vote, we also consider the percentage oft decisions between the individual task and managers nal decisions (32.2%). A Wilcoxon sign-rank test suggests

lack of variability in the data (in some of the experimental conditions none of the participants were assigned to some of the six cohorts), weuct a Kruskal-Wallis test for ERC, F&S, Mixture and None cohorts.onducted a series of logit regressions to determine whether there is a correlation between being assigned to the EF, ERC, F&S or MM cohortscore. We do not nd any statistically signicant coefcients (all probabilities are greater than 0.136).trongest measure of consistency for managers. According to this measure, a decision is considered consistent only if a manager has repeatedlye alternative in a given lottery pair throughout the experiment, i.e., in the individual task, in the team vote and in the nal decision. Otherwise,

onsidered to be inconsistent according to ALL. Note that the IND-VOTE measure for ordinary players is equivalent to the ALL measure for


that managers decisions in the individual task and their nal decisions in the team task are not statistically signicantlydifferent (p = 0.711).

Only 14.3% of managers nal decisions are different from their decisions during the team vote. This difference is notstatistically signicant either (Wilcoxon sign-rank test p = 0.1953). Note that the low inconsistency rates between the teamvote and the nal decisions suggest that managers appear to vote for their preferred lottery rather than randomize betweenthe two alternatives during the team vote. Overall, the inconsistency rates observed in our experiment are very similar tothose often reported in studies on individual repeated (binary) choice under risk (e.g., Hey and Orme, 1994).

3.2.3. Risk attitudesRecall from the experimental design (see Section 2.1.2) that we elicit participants attitudes toward risk by using the H&L

procedure.35 According to this procedure, the majority of experimental participants (71.9%) are at least slightly risk averse,14.5% are rithese particattitude ranand EN treaplayers (Wi

Manageaverage maprimarily frtest p = 0.05not statistica participanmembers vEN treatme

3.3. Determ

In this sstyle. Since in their pro1994). EachL]. The depe

yli ={

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P(yli =

where Xcapturing u

We assuand followslog-likeliho

LL =

To insurture methoexplanatorymodel wheintercept lo

35 Detailed rAppendix F).36 Adaptive q

bution of the u37 We have a

heterogeneitysk neutral and 4.9% are risk seeking. The ranks of 28 (8.6%) participants are excluded from consideration becauseipants have switched between a relatively safe and a relatively risky lottery more than once. The average riskk of the remaining part

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