Nelson Lau, Yakov Bart, J. Neil Bearden, Ilia Tsetlin
We investigate the use of exploding offers in job hiring situations via behavioral experiments. The proposer chooses between issuing an exploding or extended offer, whereas the responder waits for a better outside alternative. Whereas an exploding offer must be accepted or rejected before discovering whether a better alternativewill arrive, an extended offer allows the responder first to learn the outcome of the better alternative. If the proposer's offer is accepted, the responder can reciprocate and alter the proposer's payoff. Across multiple studies, we find that a large portion of proposers issue exploding offers even though this results in substantially lower payoffs to themselves. These losses primarily arise from negative reciprocation by responders after accepting exploding offers. We show that decision makers exhibit behavioral consistency between their response to offers and the offers they make to others. Finally, we demonstrate that it is possible to decrease the propensity of making exploding offers through making potential negative reciprocity more salient by encouraging explicit introspection of the outcomes. ©2014 INFORMS.
KCG Asia Pacific, Singapore, 079912, Singapore; INSEAD, Singapore, 138676, Singapore
Research at a Glance
Register to unlock
Topics & SDG Alignment
Register to unlock
Collaboration
Register to unlock
Author Profile (Selected)
Register to unlock
References Overview
Register to unlock
Journal & Source
Register to unlock
Metadata & Integrity
Register to unlock