Lecture 2 - I & II Flashcards
What is the definition of social preference?
A concern for the payoffs allocated to other relevant reference agents in addition to the concern for one’s own payoff
What are 3 types of social preference?
- Altruism
- Fairness / Inequity aversion
- Reciprocity
What are the game rules of the prisoner’s dilemma?
Confess , confess: (A,A)
Silent, confess: (B, C)
Confess, silent: (C, B)
Silent, silent: (D, D)
C > D > A > B
What is the theoretical prediction of the prisoner’s dilemma game?
Confess, confess is the dominant strategy equilibrium
What was the cooperation rate in lab one-shot PD conducted by Shafir&Tversky?
33.3%
What was the cooperation rate in one-shot PD conducted by Khadjavi& Lange?
50%
What is the estimated effect of stakes on cooperation rates in the PD?
-4.3% to -4.9%
What are the game rules of the ultimatum game?
- Proposer is given an endowment by the experimenter
- Proposer chooses how much of the endowment they wish to offer to responder
- Responder decides to accept offer or reject
- If reject, both get 0
What is the theoretical prediction for the Ultimatum Game?
The proposer offers the minimum amount and the responder accepts
What is the experimental evidence for the ultimatum game?
- Average proposer offers are about 40%
- Responders reject offers below 20% about half the time
What is the difference between humans and apes in the ultimatum game?
Apes are rational maximizers and are not sensitive to fairness. They tend to accept any offers
Why is the Ultimatum game insufficient for proving altruistic motives?
There is a strategic reason for proposers to offer more than zero so that responders do not reject the offer
What are the game rules of the dictator game?
Same as the ultimatum game but responder has no ability to reject
What is the theoretical prediction for the dictator game and what is the experimental evidence?
- Theory predicts Proposer offers 0
- Findings show average proposer offers are about 20%
What are 3 factors that affect decisions in the Ultimatum game?
- Stakes
- Age
- Entitlement
How do stakes affect proposer offers in the ultimatum game?
Higher stakes lead to lower but not 0 offers from proposers
How does age affect proposer offers in the ultimatum game
Younger children gave less money than older participants
How does entitlement affect proposer offers in the ultimatum game
Entitlement has a negative effect on offers. Anonymity further strengthens the effect
What are the rules of the Trust Game?
- Player 1 is given an endowment X
- Player 1 chooses how much of the endowment, Y, will be given to player 2
- Player 2 receives 3Y
- Player 2 decides how much of the 3Y to send back to player 1.
Theoretical prediction for the Trust Game?
- 2nd mover sends back 0 to the 1st mover
- 1st mover sends 0 to the 2nd mover
Experimental evidence for the Trust Game?
- The 1st mover sends about 50% of their original endowment to the 2nd mover. Only 10% of the subjects act selfishly
- Average amount returned to 1st player exceeds amount originally sent. Only about 20% of the subjects act selfishly
What are the rules of the 3rd party dictator game?
- Player 1 and 2 play a dictator game
- Player 3 observes the decision made and can award costly punishment points to reduce the payoff of player 1
Theoretical prediction for 3rd party DG?
3rd party does not punish the dictator
Experimental evidence for the 3rd party DG?
- ~ 2/3 of the 3rd parties punished the violation of the distribution norm
- Punishment increased the more the norm was violated
What are the game rules for VCM?
- Play n rounds. Each has X points in each period
- Choice to allocate between private and public account
- For each point allocated to private, same number of points received
- For each point allocated to the group account, everyone receives MPCR x1 point
What is the individual profit function for the VCM?
Profit = e-c + (sum of c for n player)x MPCR
C= Contribution to public account
E= endowment
What is the theoretical prediction for the VCM game?
Everyone is a free rider and contributes 0 to the group account.
What is the experimental evidence for the VCM?
- Initial cooperation of about 40-60%
- Cooperation decreases with repetition
- Restart effect
- Positive effect of MPCR
- Positive effect of partner vs stranger
- Mixed effect of group size
Factors that influence the cooperative decision in VCM
- Punishment
- Communication
- Time
What was the punishment mechanism in Fehr and Gachter?
- In the VCM, punishers could spend 1 point to reduce payoffs by 3 points.
- 2 conditions where punishment in first half or in second half
Effect of punishment on decision in VCM?
Punishment increases average contribution
Effect of communication on VCM contributions?
Positive effect that is eroded as communication gets more restricted
Alternative explanation for why face to face communication leads to largest effect on average contributions?
Loss of anonymity
Effect of time on VCM decisions?
Faster decisions lead to higher contributions
What was an alternative explanation for the time effect on VCM?
Subjects in the time pressure condition simply predict that others will contribute more and thus, contribute more themselves
What is the underlying mechanism for the time effect on VCM decisions?
More time leads to subjects making decisions based on reflection instead of intuition
What is the proof of social preferences in experiments?
- Non-zero offers in DG
- Rejection of low offers in UG
- Reciprocity of responders incTrust Game
- Voluntary contributions and costly punishment in VCM
