The Longest Journey Begins With a Single Step: A Real Options Approach to Social Dilemmas
McCarter, Matthew Wayne
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https://hdl.handle.net/2142/72301
Description
Title
The Longest Journey Begins With a Single Step: A Real Options Approach to Social Dilemmas
Author(s)
McCarter, Matthew Wayne
Issue Date
2009
Doctoral Committee Chair(s)
Northcraft, Gregory B.,
Department of Study
Business Administration
Discipline
Business Adminstration
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Psychology, Behavioral
Psychology, Social
Business Administration, Management
Abstract
Collective action faces a public goods social dilemma where there exists an inherent tension between individual and collective interests. Considering the economic and social significance of public goods dilemmas, an important research question is why public goods dilemmas often result in collective failure. This dissertation proposes an explanation and solution for this question. By way of explanation, public good dilemmas often result in collective failure because individuals perceive themselves as highly vulnerable to the uncertain behavior of others. The solution to this question is found in taking a real options approach to social dilemmas. The thesis of this dissertation is that, in social dilemmas, real options provide collectives opportunity to achieve small wins and small wins enable collective action by reducing perceived vulnerability.
Real options allow individuals in social dilemmas to know they can trust their partners. If there is mutual cooperation when investing in the pilot project, then this mutual cooperation acts as a small win, and this small win increases trust. Increasing trust reduces uncertainty about what others will do, and this decrease in uncertainty minimizes perceived vulnerability. Because of reduced perceptions of vulnerability, individuals are more willing to contribute toward the public good. The effect of the pilot project on trust is moderated by an individual's exposure in the pilot project. When exposure is high, mutual cooperation is less likely, leading to a trust breach and collective-task failure, respectively decreasing a member's trust in the other members' intentions and belief in their ability to mobilize to collective action. When exposure is low, mutual cooperation is most likely; however, without "enough vulnerability" among parties, high trust and efficacy beliefs are less likely to develop. This dissertation tests these hypotheses using a series of laboratory experiments. These experiments also provide theoretical elaboration on the role of several real option structures and outcome variance. The results show support for the proposed model and also offer theoretical and managerial implications for how real options should (not) be used to foster collective action.
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