Managerial Behavior in the Lab: Information Disclosure, Decision Process and Leadership Style

This paper reports the results from a lab experiment in which subjects playing the manager role can implement either an efficient / inegalitarian allocation or an inefficient / egalitarian allocation of payoffs. The experiment simulates a stylized managerial context by allowing the manager to manipulate information and select the decision process and by allowing the stakeholders to retaliate against the manager given different choices in the decision process. We found that the inefficient allocation is often selected and that this choice depends on whether the employees can retaliate against the manager and on whether the manager can hide information about the payoffs. The social preferences of the manager also explain the choice of the option. However, the decision process and the managerial style based on self-reported attitudes have little influence on the choice of allocation. This is consistent with employee satisfaction essentially depending on the payoff and not being sensible to the process.