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The Determinants of Managerial Decisions Under Risk

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  • Martin G. Kocher

    ()

  • Ganna Pogrebna

    ()

  • Matthias Sutter

    ()

Abstract

In hierarchical organizations the role of a team leader often requires making decisions which do not necessarily coincide with the majority opinion of the team. However, these decisions are final and binding for all team members. We study experimentally why, and under which conditions, leaders resort to such decisions. In our experiment, teams are presented with several paired lottery choices. They decide by majority voting which lottery from the lottery pair they prefer to be played out. After all members of the team have made their choices, the team leader is informed about the outcome of the vote and has an opportunity either to confirm or to alter the majority decision. We find that leaders overrule their teams in 35% of cases and such decisions are primarily driven by divergent preferences of leaders and the other team members. Male, younger and more risk seeking (as opposed to female, older and more risk averse) leaders overrule decisions of ordinary team members more often. We discuss the implications of our findings for the management of organizations.

Suggested Citation

  • Martin G. Kocher & Ganna Pogrebna & Matthias Sutter, "undated". "The Determinants of Managerial Decisions Under Risk," Working Papers 2008-04, Faculty of Economics and Statistics, University of Innsbruck.
  • Handle: RePEc:inn:wpaper:2008-04
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Bonein, Aurélie & Serra, Daniel, 2007. "Another experimental look at reciprocal behavior: indirect reciprocity," MPRA Paper 3257, University Library of Munich, Germany, revised Mar 2007.
    2. Jesus Crespo Cuaresma & Andreas Breitenfellner, "undated". "Crude Oil Prices and the Euro-Dollar Exchange Rate: A Forecasting Exercise," Working Papers 2008-08, Faculty of Economics and Statistics, University of Innsbruck.
    3. Selim Jürgen Ergun & Teresa García-Muñoz & M.Fernanda Rivas, 2010. "Gender Differences in Economic Experiments," ThE Papers 10/14, Department of Economic Theory and Economic History of the University of Granada..

    More about this item

    Keywords

    leadership; risk attitude; managerial decisions; collective choice; choice under risk.;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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