Transparency and Fairness in Organizational Decisions: An Experimental Investigation Using the Paired Ultimatum Game

Organizations often keep secret their decisions about what employees receive e.g., salary, budgets, benefits) to manage fairness concerns. The authors propose that this can be counterproductive because of a mechanism they call the “escalation of deservingness under secrecy,” where the existence of peers can inflate one’s own sense of deservingness, even when the actual allocations to peers are unknown. Building on the ultimatum game, the authors developed a paired ultimatum game (PUG) in which a player and a peer respondent engage with the same offeror simultaneously but with no direct competition between respondents. Across three experiments - a live interaction study as well as two scenario studies - using the PUG, the authors analyze the conditions under which transparency may be better than secrecy in preventing the escalation of deservingness perceptions.