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Review of Accounting Studies

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26-04-2021

Status motives and agent-to-agent information sharing

Authors: Jasmijn C. Bol, Justin Leiby

Published in: Review of Accounting Studies | Issue 1/2022

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Abstract

Although decision-making within firms improves when agents share information with one another, agents often have limited motivation to share because doing so takes effort and time. In four experiments, we examine how agents’ responses to information sharing controls depend on an important source of motivation: active status motives, that is, the desire to gain respect from others. In a rewards-based system that compensates agents for sharing, agents with active status motives demand relatively larger rewards. In a sacrifice-based system that does not compensate agents for sharing, agents with active status motives make larger sacrifices but only when sharing is visible to others. In brief, agents with active status motives show off in the manner the control system frames as easiest, that is, conspicuous value-signaling or conspicuous generosity-signaling. Broadly speaking, active status motives inhibit sharing when sharing involves rewards but decrease barriers when sharing involves sacrifice. Understanding the motivation for status is critical to motivating agent-to-agent sharing within firms.

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Benbya and van Alstyne (2011) cite SAP, Eli Lilly, McKinsey, Siemens, Bank of America, IBM, and Fujitsu as examples of large corporations that have adopted such markets.

Another way to reward information sharing is making it part of agents’ performance evaluation. However, because information sharing often cannot be measured objectively, incentive systems often only provide implicit incentives for information sharing through subjective evaluation of agent behavior (Bol 2008, 2011).

Evolutionary psychology shares characteristics with traditional economics, such as its focus on the actions of self-interested individuals. It differs in that traditional economics assumes a stable utility function, whereas evolutionary psychology assumes that utility functions differ depending on the evolutionary motive that is active.

There is also evidence that other evolutionary motives influence common financial decisions and preferences, such as risk seeking versus avoidance, temporal discounting, and resource diversification (Kenrick et al. 2001; Wilson and Daly 2004; Griskevicius et al. 2010; White et al. 2014). For example, Li et al. (2012) examine how loss aversion, i.e., weighing losses more heavily than corresponding gains, differs depending on which evolutionary motive is active. Holding incentives constant, they find that loss aversion intensifies when self-protection motives are active and disappears among males when mate acquisition motives are active. Moreover, specialized decision rules often have clear ties to ancestral, as opposed to modern priorities. For example, New et al. (2007) find that people more quickly and accurately detect objects that posed threats in ancestral environments (e.g., large predators), as opposed to objects that pose substantially greater threats in contemporary environments (e.g., fast-moving vehicles).

This does not mean all information sharing necessarily triggers status motives. For example, the sharing may be reciprocal, such that neither agent is advantaged, or status motives may be outweighed by other factors (i.e., motives), such as social bonds, trust, fear, etc.

It is helpful to distinguish status benefits from reputation benefits, which are distinct constructs. Status benefits stem from improving or securing the agent’s perceptions of their ordinal rank among similar agents. By contrast, reputation benefits stem from the agent’s past actions updating others’ beliefs about either the agent’s possession of a desirable attribute or the agent’s future actions. While there are similarities, e.g., generosity can increase status and can cultivate a reputation for generosity, the distinctions are critical for our setting. Past actions are central to attaining reputational benefits—including maintaining consistency in those actions—whereas this history is not necessary to attain status benefits. Reputation benefits assume a future period or beliefs that a future period will occur, whereas status benefits have value in a one-period setting.

Even when status motives are active, agents are unlikely to demand the largest possible reward, due to motivations to act fairly (or appear to act fairly), consistent with evidence in experimental economics (e.g., Hoffman et al. 1994).

This is similar to the concept of costly signaling in evolutionary biology that has been observed in a variety of organisms, including humans, reptiles, birds, fish, and plants (Ward and Zahavi 1973; Zahavi 1975). Spence (1973) contemporaneously developed a similar theory in economics to explain that education is a signal that a person is a high ability “type” and thus will receive higher wage offers from employers. Our setting differs from Spence’s setting in that agents’ goal in sharing information in our setting is not to communicate a type to enable sorting. This acknowledges the reality that the information-sharing dilemma in many settings is not that agents cannot bear the costs of information sharing but rather that agents are unwilling to do so. Our focus is on conditions in which an agent derives greater utility from gaining prestige through information sharing, holding underlying abilities constant.

We make no prediction for the effect of status motives in the lower visibility condition, because lower visibility conditions offer limited and opposing means to satisfy status motives through sacrifice. Sacrificing less could weakly satisfy status motives by allowing the participant to feel superior to the lone help seeker, but participants also could weakly satisfy status motives by sacrificing in front of the lone help seeker. Because there is no clear directional prediction, we expect no effect.

All experiments received IRB approval from the researchers’ institutions

All of our reported findings are robust to excluding participants who answered the three questions incorrectly.

While the theory of evolutionary psychology fundamentally relates to social situations, actual social interaction in an experiment is not necessary to trigger these motives (e.g., Griskevicius et al. 2006, 2007, 2009, 2010; Durante et al., 2011). This is consistent with studies that examine interpersonal or interactive concepts like persuasion, negotiation, and social bonds with experiments that do not involve actual interaction.

We presented the help request and the information sharing decision after the 15 rounds of play, because doing so allowed participants to make the sharing decision with full knowledge of the information’s value. We chose to make the help-seeker’s performance relatively low, as low performers are more likely to seek help.

We thank Vlad Griskevicius for allowing us to use his materials for the prime. Though this prime includes competitive features, competitiveness is not necessary to trigger status motives. Other cues that trigger status motives include highly regarded people or products, symbols of success and accomplishment, or merely interacting with rivals.

In a one-shot task, neoclassical economics would argue that all other players should be willing to pay up to $0.29 for the information, as doing so would leave them strictly better off in expectation. However, this requires that others trust that the asking price is a precise and credible signal of the information’s value. We chose the assumption that 50% of others would buy at $0.29 or lower, because behavioral economics finds that players frequently act such that others earn roughly 50% of the available surplus (Nowack et al. 2000).

Participants also completed a 20-item altruism scale (Rushton et al. 1981). Altruistic personality differences do not affect participants’ decisions in any of the tests in experiment 1a, nor do they interact with status motives.

Findings for H1 are likely driven by participants giving information away for free, as the average asking price does not differ between status motive conditions when we remove these participants.

We set minimum and maximum asking prices to keep the number of other agents the same as in experiment 1a, while allowing a clean, mechanical payoff function. To achieve a simple payoff function, the minimum price was $0.02/person in experiment 1b and $0.05/person in experiment 1c. Because of this minimum asking price, we added an explicit choice option to give information away for free, rather than inferring this choice from a price of $0.00 (as we did in experiment 1a).

We manipulate visibility in Experiment 2 but not in Experiments 1a–1c, because we do not have strong a priori theory to predict that visibility and status motives would interact in a rewards-based system. We expect agents with active status motives to demand higher asking prices in both higher and lower visibility settings.

Our inferences do not change when our dependent measure is the percentage of total earnings that each participant was willing to sacrifice.

We did not measure self-monitoring in experiments 1a–c because we did not believe the rewards-based system was suggestive of a competitive norm. Nonetheless, we can cast serious doubt on the validity of a norm conformity explanation in experiments 1a–c. Specifically, given the evidence from our self-monitoring measures, a norm conformity explanation would require the status motive prime to have increased norm conformity in experiments 1a–c but not in experiment 2. We are aware of no theory or evidence to suggest that status motives would trigger conformity differently across our two tasks, and we can therefore conclude that, at the very least, norm conformity would be a less parsimonious explanation than status motives.

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Title: Status motives and agent-to-agent information sharing
Authors: Jasmijn C. Bol
Justin Leiby
Publication date: 26-04-2021
Publisher: Springer US
Published in: Review of Accounting Studies / Issue 1/2022
Print ISSN: 1380-6653
Electronic ISSN: 1573-7136
DOI: https://doi.org/10.1007/s11142-021-09598-5

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