Academic journal article Administrative Science Quarterly

Reversals of Preference in Allocation Decisions: Judging an Alternative versus Choosing among Alternatives

Academic journal article Administrative Science Quarterly

Reversals of Preference in Allocation Decisions: Judging an Alternative versus Choosing among Alternatives

Article excerpt

This paper identifies a systematic instability in the weight that people place on interpersonal comparisons of outcomes. When evaluating the desirability of a single outcome consisting of a payoff for oneself and another person, people display great concern for relative payoffs. However, when they choose between two or more outcomes, their choices reflect greater concern with their own payoffs and less concern for relative payoffs. Modal subjects in our experiments rated the outcome of $500 for self/$500 for other as more desirable than the outcome $600 for self/$800 for other when both were evaluated independently, but they chose the latter outcome over the former when presented with the two options simultaneously. We offer a theoretical explanation for this phenomenon and demonstrate its robustness.(*)

Understanding how people respond to the outcomes of allocation decisions is critical to interpreting the role of reward in organizations. While the perceived fairness of procedures and outcomes affects the evaluation of allocations, interpersonal comparisons may be even more important: How do my outcomes compare to the outcomes of others? Adams (1963, 1965) and Homans (1961), among others, long ago postulated that interpersonal comparisons are critical to how people make sense of social exchange situations. Recent research has shown that people can be so concerned about interpersonal comparisons that they will often prefer outcomes that reduce their own and other parties' payoffs in an effort to avoid inequalities (Loewenstein, Thompson, and Bazerman, 1989). In organizations, dysfunctional interpersonal comparisons of how scarce resources are distributed can result in motivational problems and organizational inefficiency. Yet inequitable resource allocations are often unavoidable across individuals, departments, and divisions (Mahoney, 1979; Baron and Pfeffer, 1990) due to budget decreases, staff layoffs, and salary compression, which are common organizational maladies of the 1990s. This paper takes a cognitive approach in exploring the negative impact of interpersonal comparisons in organizations. In particular, we examine a systematic inconsistency in how people apply interpersonal comparisons when evaluating allocations.

One of the most popular research streams for studying the effects of interpersonal comparisons on allocation decisions is the distributive justice literature. Here, judgments regarding justice, or "fairness," represent the degree of equality or equity across parties' payoffs that is considered normatively acceptable or desirable within a situation. Research in the organizational and social psychological literatures has found that both the degree of concern for others' outcomes and the nature of that concern (i.e., whether it is positive or negative) depend on a variety of factors. One important factor is the nature of the relationship between the parties (Deutsch, 1975; Clark and Mills, 1979). Allocating resources equally is viewed as fair when the goal of the interaction is to maximize cooperation and social harmony (Deutsch, 1975; Austin, McGinn, and Susmilch, 1980). Allocating resources equitably (i.e., in proportion to earned rights or inputs) may be seen as fair when relations focus on maximizing economic productivity (Walster, Walster, and Berscheid, 1978; Deutsch, 1986). Allocations based on need (i.e., to those in most need until equality of general circumstances is obtained) are typically viewed as fair when fostering personal welfare is the dominant goal (Yaari and Bar-Hillel, 1984; Deutsch, 1986).

In organizations, this framework suggests an equity-based approach to the distribution of resources, and a great deal of research has been inspired by equity theory (Adams, 1965) over the last 20 to 30 years. However, evidence regarding the consistency of equity as the accepted norm for allocating resources in orgazations has been inconclusive, and interest in equity theory has waned (Miner, 1984; Reis, 1986; Greenberg, 1987). …

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