Relative Hedonic Utility and Budgetary Conflict Resolution

John Y. Lee

doi:10.1108/S1474-7871(2012)0000021009

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Advances in Management Accounting

ISSN: 1474-7871
Series editor(s): Professor Marc Epstein and Professor John Y. Lee

Subject Area: Accounting and Finance

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Relative Hedonic Utility and Budgetary Conflict Resolution

Document Information:
Title:	Relative Hedonic Utility and Budgetary Conflict Resolution
Author(s):	John Y. Lee
Volume:	21 Editor(s): Marc J. Epstein, John Y. Lee ISBN: 978-1-78190-104-5 eISBN: 978-1-78190-105-2
Citation:	John Y. Lee (2012), Relative Hedonic Utility and Budgetary Conflict Resolution, in Marc J. Epstein, John Y. Lee (ed.) Advances in Management Accounting (Advances in Management Accounting, Volume 21), Emerald Group Publishing Limited, pp.77-86
DOI:	10.1108/S1474-7871(2012)0000021009 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
Abstract:	This article makes a contribution to the conflict resolution literature by examining the effect of relative hedonic utility on budgetary conflict resolution. A lab experiment, using practicing CPAs as subjects, has been conducted to examine the effect. The literature in this field supports the implication that a person's happiness, which classical economists call hedonic utility, depends not only on the true state she (he) is in, but also on her (his) perceived state relative to the state of others. The biased perception makes a decision maker look at the state of the world more often when the state is bad than when the state is good, according to a prior research study. Although the true state of the world is split evenly between a good state and a bad one, a biased perception makes a decision maker compare herself more often to her neighboring individual when the state is bad. Accordingly, a decision maker who feels unhappy more often, while the magnitude of the pain may be the same, would exhibit a more distributive, zero-sum game type conflict resolution mode relative to another decision maker who feels unhappy less often and shows a more integrative conflict resolution mode. The test results confirmed the hypotheses. Statistically significant test results show that there are distinct effects of biased perception of individuals on budgetary conflict resolution.