How does procedural justice shape the desirability of markets?

Journal of Economic Psychology 28 (2007) 79–92 www.elsevier.com/locate/joep

How does procedural justice shape the desirability of markets? Harris Sondak a, Tom R. Tyler

b,¤

a

Department of Management, David Eccles School of Business, University of Utah, 1645 E. Campus Center Drive, Salt Lake City, UT 84112-9301, USA b Department of Psychology, New York University, 6 Washington Place, Room 579, New York, NY 10003, USA Received 19 May 2005; received in revised form 26 September 2005; accepted 8 February 2006 Available online 5 May 2006

Abstract Past studies of markets show that people oppose the use of markets as allocation procedures when they believe that markets produce distributively unfair or immoral outcomes. This study tests the hypothesis that people also make distinct procedural justice judgments about markets which independently shape their rating of the desirability of using markets. The results indicate that people do make distinct procedural justice judgments and that those judgments are important in shaping their evaluations of market desirability. Further, procedural justice judgments are equally inXuential in shaping evaluations of market and nonmarket allocation procedures. In contrast to Wndings linking desirability to issues of distributive fairness or morality, which suggest the desirability of identifying spheres of justice within which markets are acceptable, these Wndings indicate the importance of designing markets so that they have features that people associate with fair procedures. © 2006 Elsevier B.V. All rights reserved. JEL classiWcation: D74 PsycINFO classiWcation: 3020 Keywords: Markets; Allocation; Procedural justice

*

Corresponding author. Tel.: +1 212 998 7816. E-mail addresses: [email protected] (H. Sondak), [email protected] (T.R. Tyler).

0167-4870/$ - see front matter © 2006 Elsevier B.V. All rights reserved. doi:10.1016/j.joep.2006.02.002

80

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

1. Does procedural justice shape the desirability of markets? One of the most common mechanisms of social allocation is a market, in which allocations occur through the procedure of buying and selling, using money as an exchange medium (“market pricing”). Fiske (1991, 1992) describes markets as one of the four fundamental forms of social relationships, contrasting them to authority ranking, equality matching, and communal sharing. Markets are widely used within contemporary American society in situations ranging from use in basic commercial transactions over goods and land (Fiske, 1991) to selling the right to pollute air (Hahn, 1989) and have even been suggested as a way to allocate human organs for transplant (Kaserman & Barnett, 2002) or babies for adoption (Landes & Posner, 1978). While the use of markets is widespread, using prices to allocate resources is not universal, in part because some people view it as desirable to trade some goods using the medium of money, but not others. Why do people make this distinction? The purpose of this study is to examine whether the procedural justice criterion typically found to be central to evaluations of the desirability of nonmarket allocation procedures (Tyler, 2000; Tyler & Lind, 1992; Tyler & Smith, 1998) also shapes evaluations of the desirability of markets. Both economists and psychologists recognize that issues of outcome morality and distributive fairness are important in evaluations of markets (Fehr, Kirchsteiger, & Riedl, 1993; Rabin, 1993). That is, people oppose market allocation when they feel that they do not lead those involved to receive the outcomes that they deserve in relationship to either principles of distributive or outcome fairness (Walster, Walster, & Berscheid, 1978) or principles of morality (Cropanzano, Goldman, & Folger, 2003). The work of Kahneman, Knetsch, and Thaler (1986), for example, shows that judgments of distributive fairness inXuence everyday commercial transactions, while studies on “taboo tradeoVs” show that moral values constrain the use of markets (Fiske & Tetlock, 1997). However, the role of procedural justice judgments in shaping the evaluations of markets is largely unexplored. Procedural justice judgments diVer from evaluations of outcome fairness or morality because they are assessments of the fairness of the process of allocation which are distinct from evaluations of the fairness or favorability of the outcomes of that process. Within social psychology, procedural justice judgments are widely found to be distinct from evaluations of either outcome favorability or outcome fairness and to have a distinct inXuence upon the acceptance of decisions (Lind & Tyler, 1988; Thibaut & Walker, 1975; Tyler & Huo, 2002) and obedience toward rules, laws, and policies (Tyler, 1990; Tyler & Blader, 2005), as well as upon people’s willingness to engage in cooperative actions within groups, organizations and societies (Tyler & Blader, 2000). Will procedural justice judgments, as opposed to evaluations of outcome fairness or moral congruence, be important when people are evaluating markets? Procedural justice is found to be central to evaluations of allocations involving third parties such as political or organizational authorities (Tyler, 2000; Tyler & Lind, 1992; Tyler & Smith, 1998), and markets do not involve such formal hierarchical relationships. Furthermore, procedural justice is found to be especially important when issues of identity and relationships are salient (DeCremer & Tyler, 2005), and markets minimize these social aspects of allocation (Weber, 2001; Williamson, 1975). Hence, it is unclear whether procedural justice will play a central role in evaluations of the desirability of markets, as it does in more social settings. Despite the absence of explicit authorities or social relationships, however, three important underlying factors included in the relational model of procedural justice judgments

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

81

seem applicable to the fairness of market procedures (Tyler & Lind, 1992). The neutrality of a decision maker involves avoidance of bias, collection of accurate information, and honest communication; market procedures may similarly be seen as more or less biased and transparent. Trustworthiness of an authority means whether one believes that the authority cares about one’s needs and concerns; in market contexts, this concern might be met to the extent that participants feel that the market incorporates the interests of the parties involved (Sondak, 1991). Status recognition by an authority involves respect for rights and politeness; market procedures might be judged to be undigniWed or in violation of people’s rights (Boyes & Happel, 1989). As an example, people who have grievances expect government authorities to enforce their entitlements as citizens, irrespective of whether they possess money or other resources. Why does it matter whether procedural justice judgments shape the evaluation of markets? The prior focus in discussions of market desirability on issues of outcome fairness suggests that people dislike markets because of the injustice of the outcomes that markets produce, as when employers use market power to lower the wages of current employees or when markets are used to achieve immoral ends, e.g., to sell one’s organs. This approach argues for a strategy of identifying spheres of justice within which markets are or are not acceptable (Walzer, 1984). That is, markets will be less acceptable in those settings in which they violate widely held principles of morality or distributive fairness. Fiske (1991, 1992) argues, for example, that market pricing will be unacceptable when societies are operating in terms of the other three models of social relationships that he outlines. In such a situation, societies are likely to view eVorts to monetize transactions as invoking a “taboo tradeoV” in which money is being used immorally (Fiske & Tetlock, 1997). A procedural justice perspective, in contrast, implies that people view markets as unfair because markets violate basic principles for fair decision making. To the degree that this procedural perspective receives support it argues that opposition to markets will vary depending upon the degree to which markets have the features associated with procedural justice, rather than in response to the fairness or immorality of market outcomes. To the degree this is true, to gain acceptability markets should be designed so as to have the features associated with procedural justice. Prior research shows that the acceptability of controversial policies, aYrmative action policies for example, changes based upon variations in the procedures used to implement those policies (Kravitz & Platania, 1993), just as procedural justice research on third party conXict resolution suggests that variations in the procedures used by third parties to resolve conXicts shape the acceptability of the solutions reached (Tyler, 2000). If reactions to procedures are based upon procedural justice criteria, then the features of particular market and nonmarket procedures should matter for the desirability of those procedures. There is some evidence that procedural justice may aVect judgments about the desirability of markets. Shiller, Boycko, and Korobov (1991) surveyed New Yorkers and Muscovites; both groups were willing to endorse the use of markets for some allocations but not for others, even when outcomes would not be aVected by the use of market procedures. In addition, Bies, Tripp, and Neale (1993) show that evaluations of decision-making procedures shape reactions to market exploitation decisions and Bolton, Brandts, and Ockenfels (2000) show procedural justice based reactions to the ultimatum game. The present study tests the hypothesis that procedural justice judgments play an independent role in the evaluation of markets. While we expect that procedural justice will broadly shape reactions to market procedures, some variation may also be observed depending on social context (Sondak, Neale, & Pinkley, 1995). The study reported here includes two contextual dimensions – the nature of

82

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

the resource being allocated and whether the allocation occurs in a work or community setting. As noted, however, our exploration of these dimensions in this analysis is only preliminary. We considered the allocation of both scarce beneWts and overabundant burdens because previous Wndings indicate that allocation preferences depend on this diVerence (Mannix, Neale, & Northcraft, 1995; Sondak et al., 1995; Wade-Benzoni, Sondak, & Galinsky, 2005). In particular, negotiators allocate burdens more equally than when they allocate beneWts (for which they prefer allocation based on equity); in addition, people seem to be reluctant to allocate burdens to those who have no say in the matter. These Wndings suggest that allocating burdens in markets may lead to diVerent judgments than allocating beneWts. We also considered whether allocations take place in work or community contexts because diVerent allocation procedures typically are used in the diVerent contexts; for example, seniority is frequently used in work settings while voting is often used in community settings. These variations were not chosen in a way that made the problems chosen equivalent, so the consideration of these variables should be viewed as exploratory. In summary, this study presented participants with an allocation problem and asked them to make judgments about several procedures for determining who gets what within that allocation. All respondents were Wrst asked about making the allocation via market pricing. Each respondent was then asked about one of eight alternative allocation procedures. The judgments were used to compare the perceived desirability of allocating resources via market and nonmarket procedures. 2. Methods A national sample of respondents completed a survey via the web. The survey asked respondents about allocations of either beneWts or burdens in work or community settings. Each respondent was asked to consider making an allocation using markets and one of eight randomly selected nonmarket procedures. Respondents rated the characteristics of the allocation procedures, as well as indicating their willingness to accept the outcome of an allocation made using each procedure. Hence, the study uses a within-respondent design in which each participant rates two procedures: markets and one nonmarket procedure. The nonmarket procedures described typical ways of allocating resources, some of which implied distributive rules (e.g., equity, equality, or need) and some of which implied procedural rules (authority, seniority, voting, consensus, or a lottery). 2.1. Sample and procedure The sample is drawn from respondents who are part of the Knowledge Networks national panel of respondents. The sample completes periodic surveys in exchange for free WebTV. The subset of respondents who participated in this study was 53% male and had a median age of 45. They were 79% White; 8% African–American; and 13% of other races (Asian; American Indian; Hispanic). Sixty-two percent were full-time workers. The income range was: $0 to $20,000, 15%; $20,000 to $30,000, 15%; $30,000 to $40,000, 20%; $40,000 to $50,000, 24%; $50,000 and more, 26%. The education range was: high school graduate or less, 33%; some college, 34%; college degree or more, 33%. Respondents were presented with allocation decisions and asked to evaluate the desirability of using market and nonmarket procedures for making those decisions. All respon-

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

83

dents were Wrst asked about the desirability of using pricing to make the allocation. In addition, each respondent was then asked to consider using one of eight alternative nonmarket allocation procedures. Hence, each respondent evaluated the desirability of using two procedures to allocate the resources involved – market pricing and one alternative procedure. The allocation decisions presented to respondents involved everyday issues likely to face work or community groups. For example, respondents were asked how their company should decide who would receive a desirable parking space or who would work on holidays. Each respondent was asked about the desirability of making that choice via market pricing – giving the parking space to the person who was willing to pay the most for it or having the person work on holidays who would do so for the least money. Each respondent was also asked about the desirability of making that same allocation via one of eight alternative procedures. The alternative procedures included consensus, lottery, voting, discretionary authority, seniority, equity, equality, and need. Participants Wrst read an introduction in which they were told: Whenever people are together—in their families, communities, and where they work—they have to make decisions about how to distribute beneWts and burdens. They received one of two background statements: Community. For example, when there is money available to fund schools, people in a community need to make decisions about which schools to fund. Similarly, when there are things that need to be done, such as cleaning up pollution, decisions have to be made about who should take on this responsibility. Work. For example, when a large oYce becomes available, people in the company need to decide who will sit in the oYce. Similarly, when there are things that need to be done, such as working overtime, decisions have to be made about who should take on this responsibility. They were then told: We are interested in your opinions about how decisions that aVect your life should be made. On the next screen, we will describe a problem. Then, we will ask for your views about how that problem should be solved. There are no right or wrong answers. They considered one of four possible allocation problems: Community. BeneWt. Imagine that your community received federal money to provide new police patrols on some city streets. The money must be used to patrol some streets, but the federal government did not indicate which streets in your community should receive the patrols. The question is how to decide whose streets will receive increased police patrols. Community. Burden. Imagine that your community has been required by the federal government to build new half-way houses for people who have been released from prison. The facilities have to be located near one neighborhood or another. The question is how to decide which neighborhoods will receive the half-way houses.

84

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

Work. BeneWt. Imagine that your work organization moved to a new location. In this new setting, most people drive to work. Unfortunately, as is often the case, there are too few parking spaces that are convenient to the workplace and only some employees can be assigned convenient parking spaces. The question is how to decide who will receive a good parking space. Work. Burden. Imagine that your work organization needed people to work at a time that most people preferred not to work, for example on Christmas day or New Year’s day. The question is how to decide who will have to work on those days. Each participant was then asked to consider two procedures for making the allocation. Every respondent Wrst considered market pricing, followed by one of the eight nonmarket alternatives. Market pricing. Give the beneWts to the people willing to pay the most for them/allocate the burdens to those willing to accept the lowest amount of money for taking them on. Lottery. Assign beneWts and burdens by chance through a lottery into which everyone is entered. Discretionary authority. Let group authorities make the decisions as they see Wt. Seniority. Assign beneWts and burdens based upon who has worked for the organization/lived in the community the longest/shortest. Voting. Let people in the group vote concerning who gets the beneWts and handles the burdens. Consensus. Let employees/community residents discuss and come to an agreement about who will get the beneWts/burdens. Equity. Give the beneWts to those who contribute most to the group. Allocate the burdens to those who contribute least to the group. Equality. Share beneWts and burdens equally across people. Need. Assign beneWts and burdens based upon employee need. In addition to evaluating the acceptability of the two allocation procedures with which they were presented, respondents also evaluated the instrumental and relational consequences of using those procedures to make decisions. Respondents were asked how likely it was that using a particular procedure would have the instrumental consequence of leading to desired outcomes. They were also asked how likely it was that using each of the two procedures would have relational consequences such as leading them to feel treated respectfully and with dignity. We solicited survey responses from 5000 randomly selected individuals in the United States. The survey was administered by the survey research Wrm Knowledge Networks via the internet. The sampling strategy used by Knowledge Networks goes beyond the population of existing internet households to sample all households in the United States with telephones by providing a random sample of households with internet access in exchange for completing surveys. The sample is demographically representative of the US population as deWned by census data.

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

85

The survey was available on-line to assigned households for approximately one week; a total of 2824 respondents completed the survey. Of this group, 1740 were employed. Those in this group were randomly assigned to complete a survey that framed an allocation decision in terms of their work organization or their community. In addition, 1084 of the respondents did not work, and these respondents all completed a survey that asked about an allocation decision in their community. Each respondent read a description of an allocation problem and two possible mechanisms for solving the problem. The allocation problem was described within either the context of the workplace or the community. The problem concerned either scarce beneWts or overabundant burdens. Each respondent was asked to respond about pricing and one of eight other procedures. Thus, the design of the survey was 2 £ 2 (workplace/ community £ beneWts/burdens) with each participants evaluating two alternative allocation mechanisms. Respondents were randomly assigned to treatment conditions, except that all unemployed respondents were assigned to respond to allocation procedures in the context of their communities. We felt that those who did not work could not respond to a hypothetical scenario about their workplace. The program used by Knowledge Networks to deliver the survey Wrst presented a screen to respondents that described the allocation situation. The next screen presented the two alternative procedures for allocating the resource in question, with pricing always presented as the uppermost of the two procedures. On subsequent screens, respondents then indicated their responses to survey items for each of the two procedures. In each case, the screen presented participants with two procedures and asked them to rate those two procedures on the dimension of interest. The main dependent variable for this study was an evaluation of the desirability of the allocation procedures. We included, as an additional antecedent variable, respondents’ political ideology, because endorsement of markets tends to be associated with more conservative politics (Dye, 1990). 2.2. Measures 2.2.1. Dependent variable The dependent variable for this study was respondents’ evaluations of the desirability of the allocation mechanisms presented as social decision procedures for the problem they were considering. 2.2.1.1. Procedural desirability. We used three items: “How desirable would it be to make the decision in this way?”; “How likely is it that this procedure would lead to an outcome that you would be satisWed with?”; and “How likely is it that this procedure would lead to an outcome that you would be willing to accept?” (alpha D 0.89 for pricing; 0.91 for the alternative procedures). 2.2.2. Independent variables 2.2.2.1. Procedural justice. Procedural justice was measured using six items. The Wrst two measured overall procedural justice: “How fair do you think this procedure is for resolving this issue?”; and “How likely is it that people in your organization [community] will feel they have been fairly treated?”. One item indexed neutrality: “How likely is it that the relevant issues would be discussed and relevant facts considered?”. One item indexed trust: “How much do you trust this procedure to lead to a decision that takes account of your

86

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

needs and concerns?”. Two items indexed status recognition: “How likely is it that the problem would be resolved in a digniWed way that treated everyone with respect?”; and “How likely is it that your rights would be respected?”. These six items were combined into an overall index (alpha D 0.90 for pricing; 0.92 for the alternative procedures). 2.2.2.2. Outcome valence. Outcome valence was measured by two items: “How likely is it that you would get the outcome you wanted using this procedure?”; and “How fair do you think the outcome you would receive would be under this procedure?” (alpha D 0.79 for pricing; 0.80 for the alternative procedures). 2.2.2.3. Ideology. We adopted a political ideology scale from Rasinski (1987) and included 10 items that measured attitudes toward social welfare issues; agreement with these items indicated more conservative attitudes toward these issues. The items were: “Many poor people simply do not want to work hard”; “Most poor people do not have the ability to get ahead”; “Maybe it is not their fault, but most poor people were brought up without ambition”; “All things considered, most people get just what they deserve in life”; “There are too many people getting something for nothing in our society”; “Anybody receiving welfare in this country should be made to work”; “Basic services such as health care and legal assistance should be provided free to all citizens (reversed)”; “Those who are well oV should help those who are not (reversed)”; “It is not right for people to go hungry (reversed)”; and “Compassion for others is the most important human value (reversed)” (alpha D 0.64). 3. Results The means for each allocation method among the full sample of 2824 are shown in Table 1. The overall results suggest that, in general, respondents viewed making allocations Table 1 The desirability of allocation procedures N

Mean (s.d.) Pricing

Alternative procedures

Pricing/alternative comparison

2824

3.18(1.98)

4.29(2.02)

t(2823) D 22.69, p < 0.001

Distributive rules Equity Need Equality

353 355 349

3.24(1.88) 3.28(1.96) 3.24(2.06)

3.42(1.87) 4.96(1.85) 5.40(1.66)

t(352) D 1.73, n.s. t(344) D 12.54, p < 0.001 t(348) D 14.63, p < 0.001

Procedural rules Seniority Lottery Authority Voting Consensus

355 354 354 359 345

2.94(1.92) 3.07(1.96) 3.47(2.03) 3.10(2.00) 3.15(1.97)

3.47(2.15) 3.63(1.98) 3.93(1.89) 4.56(1.88) 4.96(1.77)

t(354) D 4.15, p < 0.001 t(353) D 4.38, p < 0.001 t(353) D 3.22, p < 0.01 t(358) D 10.70, p < 0.001 t(344) D 13.51, p < 0.001

Overall

Note. The scale runs from 1 to 7, with high scores indicating that the mechanism was desirable, that decisions were expected to be satisfactory, and that people were expected to be willing to accept decisions made via that mechanism.

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

87

by market pricing as undesirable. Seven of the eight alternative procedures were signiWcantly more desirable than pricing. Consistent with the Wndings of earlier studies, these results suggest that there are clear limits to people’s enthusiasm for making allocations via market prices. The one exception to this general pattern was the use of equity. Overall respondents viewed making an allocation via the procedure of market pricing as equal in desirability to making that allocation via the distributive fairness rule of equity. What factors shape the desirability of market procedures? That is, what factors lead people to be willing to accept the use of this allocation procedure? In particular, we tested whether procedural concerns had independent and important eVects on these preferences and judgments, as predicted by the relational model of procedural justice. We used regression analysis to address these questions. Separate regressions were conducted for the market based judgments made by all respondents and within each nonmarket procedure, leading to a total of nine equations. Each respondent evaluated the market procedure and one nonmarket procedure. As a result, the comparison of market and nonmarket procedures is a within-respondent comparison. The dependent variable for each equation was the desirability of using that procedure to make the allocation. There were Wve independent variables. Two were the scales reXecting outcome valence and procedural justice. The third was the scale measuring ideology. The last two were the manipulated variables: arena (work/community) and allocation issue (beneWt/burden). The Wve independent variables were entered simultaneously. The results of the overall regression equations are shown in Table 2. These equations show the eVects of expected outcome valence, procedural justice, political ideology and social context on the desirability of the allocation procedures. Market procedures are shown in the left column, while eight alternative, nonmarket procedures are shown to the right. Each respondent compared markets to one nonmarket procedure. The results suggest that the importance of procedural justice in shaping ratings of desirability was very similar in markets (beta D 0.43) and nonmarkets (average beta D 0.44). Hence, people were found to place approximately the same weight on relational concerns when evaluating the desirability of markets and a variety of nonmarket allocation approaches.

Table 2 Comparing market and nonmarket procedures Distributive rule

Procedural rules

Eq. (1)

Eq. (2) Eq. (3)

Market

Equity Equality Need

Beta weights Outcome 0.40¤¤¤ valence Procedural 0.43¤¤¤ justice Ideology 0.01 Arena ¡0.05 BeneWt/burden ¡0.09 Adj. R2 66%

Eq. (4)

Eq. (5)

Eq. (6)

Ave. Eq. (7)

Authority Seniority Vote

Eq. (8)

Eq. (9)

Consensus Lottery

0.41¤¤¤

0.41¤¤¤

0.26¤¤¤

0.32¤¤¤

0.39¤¤¤

0.35¤¤¤

0.45¤¤¤

0.52¤¤¤ 0.39

0.43¤¤¤

0.38¤¤¤

0.53¤¤¤

0.53¤¤¤

0.41¤¤¤

0.51¤¤¤

0.40¤¤¤

0.30¤¤¤ 0.44

0.04 0.06 0.06 66%

¡0.12¤¤¤ ¡0.01 ¡0.03 ¡0.05 ¡0.04 ¡0.01 0.18¤¤¤ 0.07¤ 0.08¤ 61% 71% 68%

0.00 0.18¤¤¤ 0.02 78%

¡0.05 ¡0.05 0.03 72%

0.07¤ ¡0.02 0.06 66%

¡0.02 0.14¤¤¤ 0.00 69%

– – – –

88

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

Table 3 Comparing the aspects of procedures in market and nonmarket procedures: Factors shaping the willingness to accept decisions Most desirable procedure

Mean Neutrality Trust Status recognition Outcome fairness

Least desirable procedure

Equality

Consensus

Need Vote

Authority Lottery

Seniority Equity Markets

4.95 4.58 4.92

4.90 4.29 4.66

4.77 4.16 4.36

4.67 4.15 4.56

4.21 3.46 3.90

3.68 2.88 3.72

3.80 3.06 3.51

3.74 3.01 3.48

3.79 2.95 3.39

2.90

2.89

3.04

2.77

3.06

2.88

2.77

3.06

2.94

Note. The columns are arranged from the most desirable procedure (equality) on the left to the least desirable (markets) on the right. Need and consensus are tied in the second rank. High scores indicate more neutrality, more trust, greater status recognition, and fairer outcomes.

Are these weights actually the same? To address this question we used SEM (Arbuckle & Wothke, 1995). We created a model in which procedural justice and outcomes inXuence desirability. We then treated the responses to markets and nonmarkets as two equations, which were estimated at the same time. Using a two step procedure, we Wrst allow the parameters for each group to be freely estimated. We then constrain the procedural justice and outcome favorability coeYcients to be equal across groups. If, in reality, these coeYcients are not equal, this will increase the Chi-square signiWcantly. We did this comparison in two ways: markets vs. distributive rules (equality, need), and markets vs. procedural rules (authority, seniority, vote, consensus, and lottery). In neither case was there a signiWcant increase in the Chi-square (Chi-square, 2 d.f. D 1.4, n.s. for distributive rules; Chi-square, 2 d.f. D 0.2, n.s. for procedural rules) indicating that the two coeYcients are equal in magnitude. Given that procedural justice generally shapes procedural desirability, we can also ask whether particular aspects of procedures are important. To examine the procedural justice characteristics of each procedure the mean neutrality, trust, and status recognition that respondent’s associated with each procedure was assessed. These mean assessments are shown in Table 3. They indicate that the most desirable procedures are highest on all three procedural characteristics, and the least desirable procedures are lowest on all three. Hence, the three aspects of procedure emphasized by the relational model of procedural justice—neutrality, trust, and status recognition—are important for the desirability of all procedures and desirable procedures have more of all three procedural attributes. 4. Discussion The results of this study indicate that procedural justice judgments play an important independent role in evaluations of the desirability of markets. This role is distinct from the inXuence of evaluations of outcome favorability and distributive fairness. As is the case with nonmarket procedures, the desirability of markets is strongly inXuenced by procedural justice judgments. It is always diYcult to support a Wnding of equal inXuence across groups, the Wnding of this study, since it is possible that the failure to Wnd diVerences reXects methodological

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

89

problems. In considering the results of this study two potential statistical artifacts need to be addressed. The Wrst is the question of the reliability or unreliability of measurement. Because judgments about both market and nonmarket procedures were measured using scales that are to some degree unreliable, it is important to consider whether that unreliability shaped the Wndings. While it is never possible to completely demonstrate that unreliability is not an issue, the high reliabilities of the scales used in this study argue against that explanation. An approach that can be taken to exploring the inXuence of reliability is to use SEM and estimate the model using the items of the scales to reXect underlying constructs. An analysis of this type was conducted, simultaneously considering market and nonmarket procedures. In this analysis, the error for every corresponding market and nonmarket item was correlated so any diVerential reliability between market and nonmarket indices was taken into account. If diVerences in reliability of measurement between markets and nonmarkets accounted for the Wndings, we would Wnd changes when we controlled for reliability. Instead, procedural justice continues to have the same weight with market and nonmarket procedures (beta D 0.48 vs. beta D 0.52), as do judgments outcome valence (beta D 0.69 vs. beta D 0.71). These results support the argument that unreliability of measurement is not shaping the results presented in this study. A second methodological problem is that of halo eVects. It is possible that people simply rated all procedures based upon a general positive or negative orientation, leading to no diVerences in the importance of procedures and outcomes in market and nonmarket settings. The analysis presented in Table 3 suggests that this argument is not correct. People’s ratings of the relational aspects of procedures—neutrality, trust, and status recognition— show clear diVerentiation among procedures. In other words, people are not treating the various procedures as similar in their characteristics. Rather, they are diVerentiating among them. While these analyses support the argument made in this paper, it is also important to acknowledge the inherent limits of this study. By measuring, rather than manipulating outcome valence and procedural justice, this study creates the possibility of measurement errors or other types of measurement invalidity. Hence, these Wndings should be viewed as preliminary and need to be conWrmed by subsequent experimental studies. They also need to be conWrmed using allocations that are not hypothetical. 4.1. Implications The use of market pricing is becoming increasingly widespread across allocation contexts and for various resources ranging, for example, from university faculty oYces (Boyes & Happel, 1989) to pollution (Ball, 2003; Hahn, 1989), and has been suggested even for allocating babies and human organs (Kaserman & Barnett, 2002; Landes & Posner, 1978). Markets are attractive allocation procedures because they theoretically allocate resources to those who most want them and because their outcomes are unbiased in the sense that personal attributes (other than ability to pay) are not a criterion that they incorporate. Thus markets diVer from many other allocation procedures that may not produce outcomes according the preferences of all involved and may reXect status, favoritism, group membership, or other social entanglements. But markets are nonetheless often resisted because they are perceived to be unfair (Fehr et al., 1993; Kahneman et al., 1986; Oberholzer-Gee, Bohnet, & Frey, 1997). Additional

90

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

examples that fairness matters in economic contexts have emerged in studies of the ultimatum game (Henrich et al., 2001). There is also some evidence that people dislike markets on procedural grounds (Bies et al., 1993; Bolton et al., 2000; Shiller et al., 1991). Our Wndings substantiate the argument that there is more to people’s reactions to allocation procedures than can be understood by focusing only on market outcomes – people also care about issues of procedural justice. Since fairness is central to the creation and maintenance of positive interpersonal climates, these Wndings support other research in pointing to the value of incorporating issues of justice and fairness into eVorts to explain behavior in social settings. The legitimacy of pricing or alternative allocation procedures in groups and organizations is important because authorities depend heavily for their eVectiveness on the voluntary acceptance of their rules and decisions by group members. People are more likely to accept decisions when they feel that they are made via fair procedures (Tyler & Blader, 2000). As a consequence, managers seeking acceptance of workplace rules (Tyler & Blader, 2000), legal authorities seeking compliance with the law (Tyler, 1990), and political oYcials seeking voluntary payment of taxes or acceptance of conscription into the army (Scholz & Pinney, 1995) all depend for their eVectiveness upon their ability to gain endorsement from group members. If people are less accepting of having allocation decisions made via markets, they are more likely to defer to the decisions made by nonmarket procedures (Tyler, 2004, 2005). And, in various nonmarket contexts, research indicates wide variations in the willingness to defer to decisions based upon the type of procedures used to make allocation decisions (Tyler & Blader, 2000; Tyler & Huo, 2002). Hence, authorities can substantially increase their eVectiveness through variation in the process by which they exercise their authority. Our Wndings suggest that those who implement market procedures also need to consider how those procedures are perceived in terms of procedural justice. The procedural justice eVects identiWed here provide important information to those seeking to increase the acceptability of allocations by markets. The distributive fairness perspective suggests that the allocations made by markets are acceptable when they accord with moral principles or assessments of outcome fairness. This approach suggests that the key to allocation is to identify the range of settings in which markets do not violate such moral values; in other words, it is important to identify spheres of justice (Fiske & Tetlock, 1997; Walzer, 1984). In contrast, a procedural justice perspective leads to a focus on the particular features of markets, features than may be more or less open to modiWcation. To the extent that either markets or nonmarket procedures are designed so as to have the core elements of a fair procedure, they and their results will be more acceptable. One example of procedural design of the type outlined is found in the development of legal procedures for conXict resolution. Studies show that people Wnd the procedural elements associated with mediation to be fairer than are those associated with arbitration or formal trials (Tyler, 1987, 1988, 1990, 1997). Hence, the legal system has increasingly shaped its dispute resolution institutions in ways that divert cases toward mediation. This change has led to increased satisfaction with the legal system, and the greater willingness of disputants to defer to third party dispute resolution decisions. The Wndings reported here support this procedural perspective in two ways. First, they indicate that nonmarket procedures are widely viewed as more desirable than markets for making allocation decisions. Second, they demonstrate that even markets themselves are judged, in part, by reference to procedural justice criteria. Hence, even when market mech-

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

91

anisms are being used for social allocations, their acceptability is enhanced or diminished by judgments about their procedural justice. Acknowledgements We thank David Brady and the Graduate School of Business, Stanford University, for sponsoring the data collection for this research. References Arbuckle, J. L., & Wothke, W. (1995). AMOS 4.0 user’s guide. Chicago: SPSS. Ball, J. (2003). Companies vow to cut emissions, create exchange to trade permits. Wall Street Journal, C14 January 17. Bies, R. J., Tripp, T. M., & Neale, M. A. (1993). Procedural fairness and proWt seeking: The perceived legitimacy of market exploitation. Journal of Behavioral Decision Making, 6, 243, 256. Bolton, G. E., Brandts, J., & Ockenfels, A. (2000). Fair procedures: Evidence from games involving lotteries. Unpublished manuscript. Department of Management Sciences. Pennsylvania State University. Boyes, W. J., & Happel, S. K. (1989). Auctions as an allocation mechanism in academia: The case of faculty oYces. Journal of Economic Perspectives, 3, 37–40. Cropanzano, R., Goldman, B., & Folger, R. (2003). Deontic justice: The role of moral principles in workplace fairness. Journal of Organizational Behavior, 24, 1019–1024. DeCremer, D., & Tyler, T. R. (2005). Managing group behavior: The interplay between procedural justice, sense of self, and cooperation. In Mark Zanna (Ed.), Advances in experimental social psychology (pp. 151–218). New York: Academic Press. Dye, T. R. (1990). The political legitimacy of markets and governments. Greenwich, CT: JAI Press. Fehr, E., Kirchsteiger, G., & Riedl, A. (1993). Does fairness prevent market clearing? An experimental investigation. Quarterly Journal of Economics, 108, 437–459. Fiske, A. P. (1991). Structures of social life. New York: Free Press. Fiske, A. P. (1992). The four elementary forms of sociality: Framework for a uniWed theory of social relations. Psychological Review, 99, 689–723. Fiske, A. P., & Tetlock, P. (1997). Taboo tradeoVs: Reactions to transactions that transgress spheres of exchange. Political Psychology, 17, 255–294. Hahn, R. W. (1989). Economic prescriptions for environmental problems: How the patient followed the doctor’s orders. Journal of Economic Perspectives, 3, 95–114. Henrich, J., Boyd, R., Bowles, S., Camerer, C., Fehr, E., Gintis, H., et al. (2001). In search of homo economicus: Behavioral experiments in 15 small-scale societies. American Economics Association Papers and Proceedings, 91, 73–78. Kahneman, D., Knetsch, J., & Thaler, R. H. (1986). Fairness and the assumptions of economics. Journal of Business, 59, 5285–5300. Kaserman, D. L., & Barnett, A. H. (2002). The US organ procurement system: A prescription for reform. Washington: American Enterprise Institute Press. Kravitz, D. A., & Platania, J. (1993). Attitudes and beliefs about aYrmative action. Journal of Applied Psychology, 78, 928–938. Landes, E. M., & Posner, R. A. (1978). The economics of the baby shortage. The Journal of Legal Studies, 7, 323–348. Lind, E. A., & Tyler, T. R. (1988). The social psychology of procedural justice. New York: Plenum. Mannix, E. A., Neale, M. A., & Northcraft, G. B. (1995). Equity, equality, or need? The eVects of organizational culture on the allocation of beneWts and burdens. Organizational Behavior and Human Decision Processes, 63, 276–286. Oberholzer-Gee, F., Bohnet, I., & Frey, B. S. (1997). Fairness and competence in democratic decisions. Public choice, 91, 89–105. Rabin, M. (1993). Incorporating fairness into game theory and economics. American Economic Review, 83, 1281– 1302. Rasinski, K. A. (1987). What’s fair is fair—or is it? Value diVerences underlying public views about social justice. Journal of Personality and Social Psychology, 53, 201–211.

92

H. Sondak, T.R. Tyler / Journal of Economic Psychology 28 (2007) 79–92

Scholz, J. T., & Pinney, N. (1995). Duty, fear, and tax compliance: The heuristic basis of citizenship behavior. American Journal of Political Science, 39, 490–512. Shiller, R. J., Boycko, M., & Korobov, V. (1991). Popular attitudes toward free markets: The Soviet Union and the United States compared. American Economic Review, 81, 385–400. Sondak, H. C. (1991). Centralized and decentralized matching procedures: A behavioral approach to social choice. Unpublished dissertation. Northwestern University. Sondak, H., Neale, M. A., & Pinkley, R. L. (1995). The allocation of goods and bads: The impact of contribution, outcome valence and relationship. Organizational Behavior and Human Decision Processes, 64, 249–260. Thibaut, J., & Walker, L. (1975). Procedural justice. Mahwah, NJ: Erlbaum. Tyler, T. R. (1987). The psychology of dispute resolution: Implications for the mediation of disputes by third parties. Negotiation Journal, 3, 367–374. Tyler, T. R. (1988). Client perceptions of litigation. Trial, 24, 40–45. Tyler, T. R. (1990). Why people obey the law. New Haven: Yale. Tyler, T. R. (1997). Citizen discontent with legal procedures. American Journal of Comparative Law, 45, 869–902. Tyler, T. R. (2000). Social justice: Outcome and procedure. International Journal of Psychology, 35, 117–125. Tyler, T. R. (2004). AYrmative action in an institutional context: The antecedents of policy preferences and political support. Social Justice Research, 17, 5–24. Tyler, T. R. (2005). A deference-based perspective on duty: Empowering government to deWne duties to oneself and to others. In N. J. Finkel & F. M. Moghaddam (Eds.), The psychology of rights and duties (pp. 137–158). Washington, DC: American Psychological Association. Tyler, T. R., & Blader, S. L. (2000). Cooperation in groups. Philadelphia: Psychology Press. Tyler, T. R., & Blader, S. L. (2005). Can businesses eVectively regulate employee conduct? The antecedents of rule following in work settings. Academy of Management Journal, 48, 1143–1158. Tyler, T. R., & Huo, Y. J. (2002). Trust in the law. New York: Russell-Sage. Tyler, T. R., & Lind, E. A. (1992). A relational model of authority in groups. In M. Zanna (Ed.), Advances in experimental social psychology (Vol. 25, pp. 115–191). New York: Academic Press. Tyler, T. R., & Smith, H. J. (1998). Social justice and social movements. In D. Gilbert, S. Fiske, & G. Lindzey (Eds.), Handbook of social psychology (Vol. 2, 4th ed., pp. 595–629). New York: McGraw-Hill. Wade-Benzoni, K. A., Sondak, H., & Galinsky, A. (2005). Leaving a legacy: Intergenerational allocations of beneWts and burdens. Duke University Working Paper. Walster, E., Walster, G. W., & Berscheid, E. (1978). Equity: Theory and research. Boston: Allyn and Bacon. Walzer, M. (1984). Spheres of justice. New York: Basic Books. Weber, M. (2001). The Protestant ethic and the spirit of capitalism (3rd ed.). Los Angeles: Roxbury. Williamson, O. E. (1975). Markets and hierarchies. New York: Free Press.