Where Do Social Preferences Come From?

Date: 2015-08
By: Chaning Jang (Department of Psychology, Princeton University)
John Lynham (Department of Economics & UHERO, University of Hawaii at Manoa; Center for Ocean Solutions, Stanford University)
URL: http://d.repec.org/n?u=RePEc:hae:wpaper:2015-8&r=net
Where do preferences for fairness come from? We use a unique field setting to test for a spillover of sharing norms from the workplace to a laboratory experiment. Fishermen working in teams receive random income shocks (catching fish) that they must regularly divide among themselves. We demonstrate a clear correlation between sharing norms in the field and sharing norms in the lab. Furthermore, the spillover effect is stronger for fishermen who have been exposed to a sharing norm for longer, suggesting that our findings are not driven by selection effects. Our results are consistent with the hypothesis that work environments shape social preferences.
Keywords: ultimatum game; social preferences; fairness; workplace spillovers
JEL: Q2 C9 C7 B4 D1

Tacit Coordination in Games with Third-Party Externalities

Date: 2013-10
By: James Bland (Department of Economics, Purdue University)
Nikos Nikiforakis (Max Planck Institute for Research on Collective Goods, Bonn)
URL: http://d.repec.org/n?u=RePEc:mpg:wpaper:2013_19&r=net
When agents face coordination problems their choices often impose externalities on third parties. We investigate whether such externalities can affect equilibrium selection in a series of one-shot coordination games varying the size and the sign of the externality. We find that third-party externalities have a limited effect on decisions. A large majority of participants in the experiment are willing to take an action that increases their income slightly, even if doing so causes substantial inequalities and reductions in overall efficiency. Individuals revealed to be other-regarding in a non-strategic allocation task often behave as-if selfish when trying to coordinate.
Keywords: social preferences, efficiency, externalities, tacit coordination, equilibrium selection, efficiency.
JEL: D63 D01 D62 C90 D03

Market experience is a reference point in judgments of fairness

Date: 2013-07
By: Holger Herz
Dmitry Taubinsky
URL: http://d.repec.org/n?u=RePEc:zur:econwp:128&r=net
People’s desire for fair transactions can play an important role in negotiations, organizations, and markets. In this paper, we show that markets can also shape what people consider to be a fair transaction. We propose a simple and generally-applicable model of path-dependent fairness preferences, in which past experiences shape preferences, and we experimentally test the model’s predictions. We find that previous exposure to competitive pressure substantially and persistently reduces subjects’ fairness concerns, making them more likely to accept low offers. Consistent with our theory, we also find that past experience has little effect on subjects’ inclinations to treat others unfairly.
Keywords: Social preferences, reference points, fairness, bargaining
JEL: C78

Accepting Zero in the Ultimatum Game: Selfish Nash Response?

Date: 2012-01
By: Gianandrea Staffiero (Universitat Pompeu Fabra)
Filippos Exadaktylos (BELIS, Murat Sertel Center for Advanced Economic Studies,Istanbul Bilgi University)
Antonio M. Espín
URL: http://d.repec.org/n?u=RePEc:msc:wpaper:201203&r=net
The rejection of unfair proposals in ultimatum games is often quoted as evidence of other-regarding preferences. In this paper we focus on those responders who accept any proposals, setting the minimum acceptable offer (MAO) at zero. While this behavior could result from the randomization between the two payoff-maximizing strategies (i.e. setting MAO at zero or at the smallest positive amount), it also implies that the opponent’s payoff is maximized and the “pie†remains intact. We match subjects’ behavior as ultimatum responders with their choices in the dictator game, in two large-scale experiments. We find that those who set MAO at zero are the most generous dictators. Moreover, they differ substantially from responders whose MAO is the smallest positive offer, who are the greediest dictators. Thus, an interpretation of zero MAOs in terms of selfish, payoff-maximizing behavior could be misleading. Our evidence indicates that the restraint from punishing others can be driven by altruism and by the desire to maximize social welfare.
Keywords: ultimatum game, dictator game, altruism, social welfare, costly punishment, selfishness, social preferences
JEL: C93

Behavioral Approach to Repeated Games with Private Monitoring

Date: 2013-03
By: Hitoshi Matsushima (The University of Tokyo)
Tomomi Tanaka (Economic Development & Global Education, LLC)
Tomohisa Toyama (Kogakuin University)
URL: http://d.repec.org/n?u=RePEc:cfi:fseres:cf309&r=net
We examine repeated prisoners’ dilemma with imperfect private monitoring and random termination where the termination probability is low. We run laboratory experiments and show subjects retaliate more severely when monitoring is more accurate. This experimental result contradicts the prediction of standard game theory. Instead of assuming full rationality and pure self-interest, we introduce naivete and social preferences, i.e., reciprocal concerns, and develop a model that is consistent with, and uniquely predicts, the observed behavior in the experiments. Our behavioral model suggests there is a trade-off between naivete and reciprocity. When people are concerned about reciprocity, they tend to make fewer random choices.