Social Preferences

Question 1

What is game theory equilibrium?

Answer 1

set of best strategies players pick to maximise payoff.

Question 2

What is Nash Equilibrium?

Answer 2

point where no player benefits from changing their action if others keep their decision constant.

Question 3

What can be said about prisoners dilemma regarding Nash?

Answer 3

1 - Nash equ. = cheat, cheat
2- Nash does not mean pareto
3- In a repeated game backwards induction shows sublime perfect equilibrium is cheat, cheat

Question 4

Who is Robert Axelrod?

Answer 4

economist that showed tit-for-tat tactic was better than cheat, cheat
- Got game theorists to come and submit a strategy and then competed the tactics

Question 5

What is a tit-for-tat strategy?

Answer 5

• Repeats the opponents action in the last round, starting with coop.
• promotes cooperation and punishes cheat

Question 6

What did Axelrods investigation discover regarding the tit-for-tat strategy?

Answer 6

• Tit-for-tat strategy collected the most points overall

- In a head to head, cheat, cheat wins but two t4t players will coop every round

Question 7

What’d Adreoni and Millar’s repeated PD experiment show?

Answer 7

-people cooperated initially
-coop collapsed towards the end, reasons:
1-Rational cooperation (building good rep for private gains)
2- Altruism (natural tendency to coop)

Question 8

What are the altruism models?

Answer 8

1- Pure altruism: care directly about others (Ui = pi + apj)
2- Duty: cooperating brings you enjoyment (Ui = pi + a, a>0 if i coops)
3- Reciprocal Altruism - both need to coop to improve utility (Ui = pi + a, a>0 if i&j coop)

Question 9

How did Adreoni and Millar test for cooperation reasoning?

Answer 9

3 conditions:
1- Strangers, play one round with a random person
2- Partners, play ten rounds with a random partner (opp. for rep building)
3- Computer 50s, play with either stranger or computer for 10 rounds, computer plays tit for tat

Question 10

What did Adreoni and Millars test for reasoning find?

Answer 10

• Findings are consistent with reputation building

- Coop still present with strangers so stable fraction are altruists.

Question 11

What was the ultimatum game?

Answer 11

• one person is given £10 and they have to propose how to split the £10, receiver can accept or reject the offer
• If receiver rejects the offer, both get nothing

Question 12

What is the nash equilibrium for the ultimatum game?

Answer 12

offer £0.01

Question 13

What were the results of the ultimatum game?

Answer 13

• mainly offer £4-5
• almost no offers below £2
• Lower offers higher chance of rejection
• Reciprocal Altruism to foster cooperation
• Reciprocal punishment against unkind behaviour.
• Don’t know how much altruism is due to ‘rational irratinality’ - not wanting to get rejected so offering more

Question 14

What is the dictator game?

Answer 14

• Proposer given £10

- They choose the offer and it cannot be rejected

Question 15

What are the findings for the dictator game?

Answer 15

• Less offered than ultimatum game, shows some of altruism must have been reciprocal
• Forsythe ‘94: 20% give half, 79% give >0
• Hoffman ‘94: <6% give half, 33% positive
• Hoffman’s study had double anonymity, this suggests people are intrinsically selfish but don’t want to appear so.

Question 16

What is the public good game?

Answer 16

• 80 subjects, each given 225 tokens
• Can keep token or add it to the public pot
• Payoff from public pot depends on contribution, more contributed, more paid out
• if all pay public, payoff = £4.95 each
• if one free rides, payoff = £4.40 + £2.25 = £6.65
• Repeated 10 times

Question 17

What is the Nash equilibrium for the public good game?

Answer 17

• All private pot

Question 18

What are the findings of the public good game?

Answer 18

• first round ~1/2 public pot

- Public pot falls after each round, virtually no public pot by the end

Question 19

What are the Causes of decay in the Public good game?

Answer 19

1- Learning, Players learn free riding is optimal
2- Rational Coop, understand free riding is optimal but tries to coop
3- frustrated kindness - gives up when others are selfish

Question 20

What was the Isaac and Walker experiment and what did it show?

Answer 20

• played two games consecutively
• end of first game 80% free ride
• start of second game public pot high again
• rules out learning!

Question 21

What was Adreoni’s experiment in 1995?

Answer 21

• investigation into whether Isaac and walker results were due to kindness or confusion
• 2 game modes:
  1) Regular
  2) Rank - total payout fixed, private payout depends on if you beat others. No incentive to be kind

Question 22

What were the findings of Adreoni’s experiment in ‘95?

Answer 22

• Lower Public contributions in rank, more free riding
• 1/2 of cooperation moves are due to kindness
• Decay is due to frustrated kindness

Question 23

How did Fehr/ Gachter suggest we can prevent the decay in public good games and how well did it work?

Answer 23

-punishmwnt mechanism
-standard game theory suggests costly to punish
Findings:
-More public contributions
-Cooperatino was sustained
-Heavy punishment for poor contributors

Question 24

What is the nash equilibrium for the dictator game?

Answer 24

£0