“The Ethics of Bluffing: The Effects of Individual Differences on Perceived Ethicality and Bluffing Behavior” G. Stoney Alder & Rebecca M. Guidice University of Nevada, Las Vegas

Competitive Bluffing  Bluffing is the practice of knowingly and intentionally communicating a misleading signal of intended action with the expectation that recipients interpret and react as if the signal were truthful (Guidice, Alder, & Phelan, 2009)  Bluffing is a common practice –Coke and Pepsi with Monsonto (Brandenburger & Nalebuff, 1996) –Intel bluffing Oregon (Sheketoff, 2005) –Kabi and Genentech Inc.using decoy patents (McKelvey, 1996) –North Korea nuclear weapons (Herman, 2005)

Competitive Bluffing: Philosophical Debate  Proponents –Carr (1968) “bluffing may be an unspoken rule of the game” –Carson (1993) –Althoff (2003)  Critics of Bluffing –Eliashberg et al. (1996) –Lewicki & robinson (1998) an objectionable form of lying that serves to misinform the opponent

Competitive Bluffing  Attitudes toward bluffing likely vary based on a number of variables.  Little research examines individuals’ beliefs concerning the ethicality of bluffing and what factors influence such beliefs –Content –Target (Guidice et al., 2009) –Context (Althoff, 2003)

Competitive Bluffing  Individual differences may also affect judgments of the ethicality of bluffing.  Research in organizational behavior indicates that individual differences influence perceptions, attitudes, and behaviors.  Ethics research similarly suggests an important role for individual variables (Kohlberg, 1984; Rest, 1986; Sparks & Merenski, 2000).  Research has ignored the effect individual differences may have on attitudes toward bluffing.

Objective  The current study examines how one individual characteristic – ethical orientation – affects assessments of the ethicality of bluffing, willingness to bluff, and bluffing behavior.

Ethical Orientation  An individual’s ethical value system (Douglas, Davidson, & Schwartz, 2001) or form of ethical reasoning (Brady, 1990), which is used to explain how individuals interpret ethical situations and engage in ethical problem solving  Research differentiates formalism (deontology) and utilitarianism (teleology) –Formalism is concerned with the idea of universal truths and principles that are adhered to regardless of circumstances. –Utilitarianism subordinates principles to context and may be understood as ‘‘consequentialism’’ such that ethical decisions are made based on expected outcomes

Ethical Orientation and Perceptions of the Ethicality of Bluffing  Formalists look to rules/principles for guidance  A behavior or decision is ethical (unethical) to the extent that it adheres to (violates) one’s principles  Formalists should adhere to a principle for truth and therefore, view bluffing unfavorably

Ethical Orientation and Perceptions of the Ethicality of Bluffing  Hypothesis 1: Ethical formalism will be negatively related to individuals’ perceptions of the ethicality of bluffing

Ethical Orientation and Perceptions of the Ethicality of Bluffing  Utilitarians evaluate the outcome of an action to determine its ethicality  An act is ethical if it produces the greatest good, accomplishes a goal, or promises the best results  Boils down to weighing the non-moral gains and losses that will accrue as a result of the bluff.  Bluffing will be favorably when it is thought of as a means to achieve a valued outcome

Ethical Orientation and Perceptions of the Ethicality of Bluffing  Hypothesis 2: Ethical utilitarianism will be positively related to individuals’ perceptions of the ethicality of bluffing

Bluffing Perceptions, Intentions,& Behavior  The theory of reasoned action (Fishbein & Ajzen, 1975, 1980) states that attitudes are meaningful predictors of intentions  Guidice et al (2009) found that perceptions of ethicality affected individuals’ willingness to engage in bluffing behavior.

Bluffing Perceptions, Intentions, & Behavior  Hypothesis 3:Perceived ethicality will mediate the relationship between participants’ ethical orientation and their willingness to mislead competitors and other organizational stakeholders

Bluffing Perceptions, Intentions, & Behavior  The theory of reasoned action also indicates that attitudes and intentions precede behavior (Fishbein & Azjen, 1975)  Hypothesis 4: Individuals’ perceptions of the ethicality of competitive bluffing will be positively related to the extent to which they actually attempt to bluff competitors

Performance Pressure  Other factors may explain bluffing behavior  Neither individual nor situational variables alone completely account for behavior (Kenrick & Funder, 1988)  Individual characteristics interact with characteristics of the environment  Research suggests that stress and intense pressure to succeed may influence ethical behavior –The greater the situational pressure to “win”, the more likely an individual will perform a potentially questionable act

Performance Pressure  Hypothesis 5a: Individuals’ felt pressure to perform will be positively related to their efforts to bluff competitors

Performance Pressure  For formalists, moral imperatives are without exception  Bluffing by high formalists will be driven more by judgments of ethicality than pressure to perform  Low formalists have greater response flexibility  Low formalists may be more apt to bluff in response to performance pressures

Performance Pressure  Hypothesis 5b: Formalism will moderate the relationship between felt pressure to perform and bluffing efforts such that the relationship will be weaker for high formalists than for low formalists

Instrumentality  Individuals are motivated to do things that have high instrumentality either for themselves or for their organization  Individuals will be more likely to mislead their rivals when they believe it enhances their chances of “winning” the competition

Instrumentality  Hypothesis 6a: Individuals’ beliefs in the instrumentality of misleading competitors will be positively related to their efforts to do so

Instrumentality  The ends justify the means for high utilitarians  When bluffing proves advantageous, other factors will be less important for high utilitarians  Low utilitarians are less concerned with outcomes  The effect of instrumentality in bluffing behavior will be less pronounced for low formalists.

Instrumentality  Hypothesis 6b: Utilitarianism will moderate the relationship between perceived instrumentality and bluffing such that the relationship will be stronger for high utilitarians than for low utilitarians.

Ethical Predisposition, Perceived Instrumentality, Perceived Ethicality, Pressure, and Bluffing Behavior Pressure To Perform Perceived Instrumentality Bluffing Behavior Formalist Orientation Utilitarian Orientation Perceived Ethicality H1 H2 H3 & H4 H5a H5b H6a H6b

Methodology  Two part study using 40 first-year MBA students and 67 senior business students –Mean age of students was 26.5 years –59% were female –97% had work experience, with an average of 8 years –54% had managerial experience, with an average of 2 years  Hypotheses 1-3 relied on data gained from a survey taken before attending laboratory session  Hypotheses 4-6 relied on data gathered as participants competed in a simulated market- entry game

Variables  Ethical Orientation. The Ethical Viewpoints by Brady and Wheeler (1996) was used to assess relative strength on utilitarianism (α =.81) and formalism (α =.75)  Perceived Ethicality of Misleading Stakeholders. Using a scenario adapted from Ross and Robertson (2000) participants indicated on a 5-point scale how ethical it would be to mislead a competitor, customer, distributor, or employer to complete an important sale  Willingness to Bluff. Using the same scenario and a 5-point scale, participants indicated the extent to which they would be willing to mislead the aforementioned targets in order to make the sale

Variables  Pressure to Perform. New three-item measure that used a 5-point disagree/agree scale to assess participants’ felt need to do well in the game (α =.66)  Perceived Instrumentality. Newly created three-item measure that used a 5-point disagree/agree scale to rate a participants’ belief that misleading competitors was a useful tactic in the market entry game (α =.71)  Perceived Ethicality of Bluffing. A newly created three-item measure that used a 5-point disagree/agree scale to measure the extent to which a participant believed it was ethical to mislead competitors in a competitive situation (α =.63)  Bluffing Behavior. The extent to which participants attempted to mislead their competitors was assessed with three items using a 5- point disagree/agree scale (α =.81)

Ethical Orientation on Perceived Ethicality of Bluffing Stakeholders

Perceived Ethicality on Willingness to Bluff Stakeholders

Perceived Ethicality on Bluffing Behavior

Indirect Effects of Ethical Orientation on Bluffing Behavior

Implications  Ethical dilemmas often involve misconduct and deception of one form or another  Interpretation of these acts falls in a gray area and depends on a number of contingencies  Bluffing research has ignored individual differences  Ethical orientation interacts with contextual factors to explain bluffing attitudes and behavior  Understanding the ethics of bluffing requires consideration of both the individual and the context

Implications Cont.  Awareness of ethical orientation may help practitioners design effective ethics programs  Enhance their ability to communicate the organization’s ethical values and expectations  Person-organization fit –If bluffing is an accepted organizational norm, high utilitarians may be a better fit than high formalists –This fit entails an element of risk as high utilitarians are also more willing to mislead their own company

Limitations and Future Research  Self-reports were used to a number of variables. However,… –this approach corresponds to that used in prior research interested in attitudes, intentions, and behavior. –the objective of our study was not to differentiate between individuals’ attitudes and intentions per se, but rather to examine whether attitudes and intentions differed as a function of the target of the bluff and how this was related to one’s ethical orientation. –factor analyses indicated that participants distinguished between different key constructs (e.g., ethical orientation)  Future research should: –consider other individual difference variables, such as stage of moral development or Machiavellianism and how they may influence beliefs about and willingness to bluff. –explore the effects of other contextual variables, such as a company’s ethical policies and programs and their effect on observed relations.

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