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The Role of Commitment Devices in Budgeting
Author(s) -
Schwartz Steven T.,
Spires Eric E.,
Wallin David E.,
Young Richard A.
Publication year - 2015
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2673
Subject(s) - unobservable , norm (philosophy) , enforcement , microeconomics , information asymmetry , interpretation (philosophy) , economics , social psychology , psychology , political science , econometrics , computer science , law , programming language
We administer an experiment to investigate a commitment device in the form of an unobservable commitment regarding a superior's acceptance rule for a subordinate's budget request. We find that unobservable commitment, when exogenously imposed, diminishes superiors' propensity for costly norm enforcement. The results for an endogenous treatment are similar except that those superiors who choose unobservable commitment only occasionally use the commitment device in a manner consistent with norm enforcement. Our interpretation of the results is that unobservable commitment decreases the emotional response to unfair behavior and that information asymmetry accentuates this effect. Copyright © 2014 John Wiley & Sons, Ltd.