Social Preferences Flashcards
What are social preferences in behavioural economics?
Social preferences refer to individuals caring about others’ outcomes, not just their own. This includes concerns for fairness, reciprocity, and altruism, leading to behaviour that deviates from strict monetary payoff maximisation.
What are the key findings from the Ultimatum Game?
Typical offers are 40–50%, and offers below 20% are often rejected. This contradicts subgame perfect Nash equilibrium with self-interested agents, indicating responders reject unfairness even at a cost to themselves.
inequality aversion vs punishing/spite, different try to tease this out
How does the Dictator Game isolate altruism from strategic concerns?
The responder has no choice, so any giving by the proposer is voluntary. Still, many proposers give 10–30%, suggesting genuine concern for others’ outcomes (altruism or fairness).
What is inequity aversion (Fehr & Schmidt, 1999)?
A social preference model where utility decreases with unequal outcomes, especially when one is behind. People dislike outcome inequality, even if it comes at a personal cost.
What does Charness & Rabin (2002) contribute to social preference theory?
They test 29 games and propose a general model combining inequality aversion, social welfare, and reciprocity motives. They find social welfare concerns better explain helpful sacrifices than inequity aversion.
What did Vanberg (2008) find about promise keeping?
He found that people are more likely to keep promises made directly to a partner (no switch) even when expectations are held constant. This supports commitment-based explanations (lying aversion) over guilt aversion.
What are the limitations of social preference findings in lab experiments (Levitt & List, 2007)?
Social preferences may be exaggerated in lab settings due to scrutiny, lack of anonymity, low stakes, and framing. In the field, factors like reputation, social norms, and incentives may dominate.
What did Kube et al. (2012) show about reciprocity in the workplace?
Non-monetary gifts (e.g. a thermos) led to more reciprocal effort than equivalent cash gifts. This suggests symbolic value and perceived kindness matter in work motivation.
What did DellaVigna et al. (2012) find about charitable giving and social pressure?
Flyers with opt-out boxes reduced small donations, showing people give partly due to social pressure. Large gifts remained, suggesting altruism plays a stronger role for big donors.
What did List (2006) find in field experiments on gift exchange?
Sellers reciprocated higher offers with better quality only when dealing with local buyers. Suggests social preferences operate when reputation or social ties are present, but break down in anonymous markets.
What did Bandiera et al. (2005) find about incentives and social preferences on a fruit farm?
Workers under relative incentives internalised negative effects on friends’ earnings and reduced effort. Effect disappeared when working with strangers or without visibility, highlighting role of social context.
How does repeated play explain cooperative behaviour among self-interested agents?
With ongoing interactions, cooperation can emerge via reciprocal strategies and threat of punishment (Folk Theorem). Even selfish players may cooperate if defection has future costs.
