Social preferences

Question 1

Assumes that economic agents are

Answer 1

Motivated purely by self-interest
Behave as if they value the payoff of relevant reference agents positively or negatively

Question 2

Fairness

Answer 2

Our perceptions of other people beliefs and intentions determine how positively or negatively we are affected by their payoff.

Question 3

Dual entitlement

Answer 3

Both parties in a transaction are entitled to certain considerations
Affects perceived fairness

Question 4

Reciprocity

Answer 4

The tendency of some people to be conditional cooperators

Question 5

Fairness games

Answer 5

Used to gain insight into people’s perception of fairness
Dictator game
Ultimatum game

Question 6

Inequality-aversion models

Answer 6

Assume that people care about their own payoffs and the relative size of these payoffs compared to the payoff of others
Fehr-Schmidt model

Question 7

Fehr-Schmidt model

Answer 7

People make decisions which minimise inequity in outcomes
Outcome-based model
Inequality-aversion
Dictator game
Ultimatum game

Question 8

Factors affecting social preferences

Answer 8

Methodological and structural
Descriptive
Demographic

Question 9

Methodological and structural factors affecting social preferences

Answer 9

Change how experiments are conducted
Largely controllable - important variable as allows individual factors and their effects to be isolated
eg. Stakes/anonymity

Question 10

Descriptive factors affecting social preferences

Answer 10

Framing effects
eg. Menu effect

Question 11

Seminar 3

Answer 11

Trust increases as age groups get older
Trust profitable for trusters only in the adult population and when trustors show full trust
Trustee behaviour consistent with inequality aversion

Question 12

Haifa experiment

Answer 12

Fine introduced in six randomly selected nurseries, but not in the control group
Resulted in increase in the number of late-coming parents
Transformed a social norm into a market norm
Selfish-cooperators

Question 13

Theories of social preferences

Answer 13

People care about their relative payoff - outcome-based models / inequality aversion (Fehr-Schmidt)
People care about others, depending on others’ behaviour - intention-based models, reciprocity (Rabin, 1993)

Question 14

Rabin model

Answer 14

If somebody is being nice to you, fairness dictates that you be nice to him. If somebody is being mean to you, fairness allows and vindictiveness dictates that you be mean to him

Question 15

Dictator game

Answer 15

Standard prediction theorises that the self-regarding dictator will give nothing to the recipient
In practice dictators transfer 28% (Engel, 2011)

Question 16

Dictator game with 3rd party punishment

Answer 16

Sanctioning behaviour of “unaffected” third parties driven by negative fairness judgments towards norm violators (Fehr, 2004)

Question 17

Ultimatum game

Answer 17

Mean offer = 40% of endowment
Mean rejection rate = 16% (Engel, 2011)
Minimum acceptable offer lower when the source of the offer is a computer (Blount, 1995)