Behavioural W5 Flashcards
What is the standard self-interest hypothesis? Broadly explain on what evidence it was based, and with what evidence is used to debunk it
All individuals are exclusively self-interested. Early evidence by Vernon Smith (1962), quick convergence to equilibrium. Later evidence = A large percentage of participants exhibit other-regarding behaviour.
What does the ultimatum game consist of, what are the usual findings and what does UG allow us to test for
Two players = the proposer and the responder. The proposer has $10 to split with the responder. The responder can choose to accept (split money) or reject the offer (both receive nothing).
Proposer sends between 40-50% of money to responder.
UG allows us to test for the self-interested hypothesis, fairness and negative reciprocity.
What does the dictator game consist of, what are the usual findings and what does DG allow us to test for
Two players = the dictator and the recipient. Dictator chooses how to split $10 with the recipient but the recipient has no input. Dictator would keep everything assuming rationality.
On average, the dictator gives around 30% of endowment.
DG allows us to test for self-interest hypothesis without the influence of others, fairness and altruism.
What does the trust game consist of and what are the usual findings
Two players = investor and trustee. Investor decides how much to give to trustee, once the amount is noted, the experimenter triples the value of the of the sum. The trustee, upon receiving this sum, decides how much to send back to the investor.
Investors send about 50% on average to trustees, but substantial
variability, Trustees roughly repay transfer.
What does the public good game consist of and what are the usual findings
Group of participants all given $10, they all have the option to donate some of their money into a common pool. The common pool will be multiplied by a factor and then split evenly. There is a big incentive to free ride. Contributions are of around 50% of endowment in one-shot interactions. Contributions of many players approach 0% towards the end of repeated interactions.
Can you think of any limitations of these games
- Simplified Laboratory Settings - experiments often take place in simple labs not fully capturing the complexity of real world interactions.
- Limited Participant Pool - participants are often university students so not representative.
- Lack of Long-Term Consequences - most of the consequences in these games are only short-term.
What characterises social preference models? Explain with an example
Social preference models characterise individuals’ preferences not only based on their own material outcomes but also on the outcomes or welfare of others. Eg: Reciprocity model.
What characterises interdependent preference models? Explain with an example
Interdependent preference models characterise individuals’ preferences as being influenced not only by their own outcomes but also by the outcomes of others. Eg: relative income theory.
What characterises intention-based reciprocity models? Explain with an example
Intention-based reciprocity models characterise individuals’ reciprocity not only based on the outcomes they receive from others but also on the intentions behind those outcomes. Eg: inequity aversion.
Explain ‘altruism’ and provide an example of what an altruism model could look like. Is there empirical evidence regarding the existence
of altruism?
Explains charitable donations and voluntary contributions to public
goods. Components include motivation and cost-benefit analysis. Andreoni & Miller (2002) using Dictator Games: Heterogeneous individuals, many individuals have other-regarding preferences.
How else to explain these results?
- Warm glow - people give because it feels good to do so.
- Social norms - people give because there is a social norm to donate.
- Image concerns - people give because who they are.
