13 - punishment and the grimmer side Flashcards
peoples contributions in public good games are motivated by 3 things
error
strategic considerations
other-regarding preferences
what are other regarding preferences
makes them want to contribute to help others
also willing to harm others
what is reciprocity
desire to reciprocate
- be kind to people that are kind
- harm people that harm
what is the reciprocity model preseneted by Dufwenberg and Kirchsteiger
- overall utility is weighted sum of 2 components: material payoffs + reciprocation payoff
- people make tradeoffs between these 2 payoffs
> utility depends on perceived intentions
what is the reciprocation payoff in
Dufwenberg
- if j is kind to i - i’s payoff is higher - and she is kinder in return
- if j is unkind - i’s payoff higher the unkinder she is
> increased payoff when you recirpocate
* willing to harm others at a cost - makes you happier
what is aversion to inequality
Fehr Schmidt preferences
- aversion to both directions of inequality, but especially towards unfavourable inequality
- get disutility from the inequality
what are Fehr Schmidt preferences
suggests that peoples utility from outcomes is influenced not only by material payoffs but also by fairness considerations and the distribution of payoffs amongst others
- more money for yourself and other person is good - if you are better off than them
- more money for them is bad if they are better off than me
- utility function depends material payoff + whether there is inequality + who is better off than who
what 2 reasons explain why people might be willing to sacrifice personal gains to enforce fairness or punish
- inequality aversion
- reciprocity
when do you get disutility in Fehr Schmidt preferences
- disutility if you are better off than others, and if others are better off than you
- especially averse to being worse off than others
explain the indifference curves
Fehr Schmidt preferences
triangle
- above the equality line = upward sloping
- below the equality line = downward sloping
- if you hurt xj enough - it will increase the utility of me
what do the ICs show about harm
I is willing to face a small cost, making both people worse off
- if j is hurt enough relative to i
* would be on a higher utility curve
- get increased utility from seeing j get hurt if j is advantaged
how could you prevent free riding problem and prevent the decay of contributions
punishment opportunities to VCM
what is the main paper
Fehr and Gachter 2000
Fehr and Gachter 2000
experimental design
VCM game
- conditions with and without punishment opportunities (punishment + no punishment phases)
- treatments = partners + strangers
what was the punishment conditions
- play a round - get stage 1 payoffs
- after the round players are told the contributions of others and can assign punishment points to them anonymously
- punishment costs both
- for each punishment point received - players points from first stage are reduced by 10%
- after players told how many punishement points they have been given
what is the standard theory of what will happen
if the game is played with punishment
subjects motivated only by own points
they would never punish
wouldnt want to incur costs of punishing
punishing has no positive effects on contributions
- solved by backward induction - they wouldnt punish and the wouldnt contribute - every round
why would players punish
- strategic motive - to encourage contributions in early rounds
- reciprocal reasons
- unfavoural inequality
how would you test the strategic motive of punishment
comparing partners and strangers
- should be more punishment in early rounds for partners
how does aversion to unfavourable inequality
justify punishment
- low contributors have higher payoffs in stage 1 than high contributors
high contributors will punish low contributors
what are the predictions of inequality aversion on punishment
- even low contributors will contribute to not get punished
- higher contributions in treatments with punishment
- low contributors punished by high
how does reciprocity explain punishement
- subjects will strong enough recipricol motives
- will punish low contributors for their unkind actions
- people want to repay unkindenss with unkindness
predictions of reciprocity
- higher contributions in punishment treatment
- punishment of low contributors
- punishment of high contributors that anticipate that high contibutors will attack them - recirpocatng the punishment
Fehr and Gaechter 2000 findings for strangers and partners
order of punishment phases doesnt make difference
always discontinuity between the rounds where the switch is
- without punishment = decay for both strangers and partners
- with punishment = dont see decay , higher contributions on average
- for partners - reversed decay
why is there no decay found with punishment
punishment prevents decay
- for partners = reverse decay - with slight increase in contributions
