Self‐serving biases: evidence from a simulated labour relationship

A self‐serving bias occurs when people subconsciously alter their perceptions about what is fair or right in a manner that serves their own interests. Perceptions of what constitutes “fair performance” may well vary according to one’s role in the employment relationship. While it is clear that employee satisfaction affects job performance, and that wage affects employee satisfaction, it is not only wage per se that determines morale, but also the perceived fairness of the received wage. Evidence from a laboratory experiment indicates these views differ significantly between participant “employers” and “employees.” We compare choices (hypothetical in the case of employers) for the amount of costly “effort” to provide in response to a wage that has been determined outside the employment relationship. In the field, managers must be aware of the relationship between fairness in compensation and employee morale, as well as their own biases regarding the fairness reference point.