Social Reciprocity

We conduct a survey and find that 47% of respondents state they would sanction free riders in a team production scenario even though the respondent was not personally affected and no direct benefits could be expected to follow an intervention. To understand this phenomenon, we define social reciprocity as the act of demonstrating ones disapproval, at some personal cost, for the violation of a widely-held norm (for example, don’t free ride). Social reciprocity differs from reciprocity because social reciprocators punish all norm violators, regardless of group affiliation or whether or not the punisher bears the costs. Social reciprocity also differs from altruism because, while the latter is an outcome-oriented act benefiting someone else, the former is a triggered response not conditioned on future outcomes. To test the robustness of our survey results, we run a public goods experiment that allows players to punish each other. The experiment confirms the existence of social reciprocity and additionally demonstrates that more socially efficient outcomes arise when reciprocity can be expressed socially. Further we find that most subjects who punish do so to discipline transgressors and helping others is largely a positive externality. Finally, to provide some theoretical foundations for social reciprocity, we show that generalized punishment norms survive in one of the two stable equilibria of an evolutionary public goods game with selection drift.reciprocity, norm, experiment, public good, learning, evolution

No Switchbacks: Rethinking Aspiration-Based Dynamics in the Ultimatum Game

The stylized facts of ultimatum bargaining in the experimental lab are that offers tend to be near an equal split of the surplus and low, near perfect offers are routinely rejected. Bimmore et al (1995) use aspiration-based evolutionary dynamics to model the evolution of fair play in a binary choice version of this game, and show that incredible threats to reject low offers persist in equilibrium. We focus on two possible extensions of this analysis: (1) the model makes assumptions about agent motivations (aspiration levels) and the structure of the game (binary strategy space) that have not yet been tested experimentally, and (2) the standard dynamic is based on the problematic assumption that unhappy games who switch strategies may end up using the same strategy that was just rejected. To examine the implications of not allowing agents to “switch back” to their original strategy, we develop a “no switchback dynamic” and run a new, binary choice, experiment with induced aspirations. We find that the resulting dynamic predicts the evolution of play better than the standard dynamic and that aspirations are a significant motivator for our participants.ultimatum game, learning, aspirations, switchbacks, replicator dynamics

Why Punish: Social Reciprocity and the Enforcement of Prosocial Norms

Recently economists have become interested in why people who face social dilemmas in the experimental lab use the seemingly incredible threat of punishment to deter free riding. Three theories have evolved to explain punishment. We survey each theory and se behavioral data from surveys and experiments to show that the theory called social reciprocity in which people punish norm violators indiscriminately explains punishment best. We also show that social reciprocity can evolve in a population of free riders and contributors if the initial conditions are favorable.social dilemma, public good, punishment, reciprocity, norm, evolutionary game theory, experiment

Social Reciprocity

We define social reciprocity as the act of demonstrating one's disapproval, at some personal cost, for the violation of widely-held norms (e.g., don't free ride). Social reciprocity differs from standard notions of reciprocity because social reciprocators intervene whenever a norm is violated and do not condition intervention on potential future payoffs, revenge, or altruism. Instead, we posit that social reciprocity is a triggered normative reponse. Our experiment confirms the existence of social reciprocity and demonstrates that more socially efficient outcomes arise when reciprocity can be expressed socially. Too provide theoretical foundations for social reciprocity, we show that generalized punishment norms survive in one of the two stable equilibria of an evolutionary game with selection drift.reciprocity, norm, experiment, public good, learning, evolution

What Norms Trigger Punishment

Many experiments have demonstrated the power of norm enforcement-peer monitoring and punishment-to maintain, or even increase, contributions in social dilemma settings, but little is known about the underlying norms that monitors use to make punishment decisions. Using a large sample of experimental data, we empirically recover the set of norms used most often by monitors and show ?rst that the decision to punish should be modeled separately from the decision of how much to punish. Second, we show that absolute norms often ?t the data better than the group average norm often assumed in related work. Third, we ?nd that di?erent norms seem to in?uence the decisions about punishing violators inside and outside one’s own group.public good, experiment, punishment, social norm, norm enforcement.

No Switchbacks: Rethinking Aspiration-Based Dynamics in the Ultimatum Game

Aspiration-based evolutionary dynamics have recently been used to model the evolution of fair play in the ultimatum game showing that incredible threats to reject low offers persist in equilibrium. We focus on two extensions of this analysis: we experimentally test whether assumptions about agent motivations (aspiration levels) and the structure of the game (binary strategy space) reflect actual play, and we examine the problematic assumption embedded in the standard replicator dynamic that unhappy agents who switch strategies may return to a rejected strategy without exploring other options. We find that the resulting "no switchback" dynamic predicts the evolution of play better than the standard dynamic and that aspirations are a significant motivator for our participants. In the process, we also construct and analyze a variant of the ultimatum game in which players can adopt conditional (on their induced aspirations) stategies.ultimatum game, learning, aspirations, replicator dynamics, experiment

Crying Over Spilt Milk: Sunk Costs, Fairness Norms and the Hold-Up Problem*

This paper explores a possible connection between two behavioral anomalies in economics, the observed responsiveness of individual decision-makers to sunk costs, and the apparent failure of backward induction to predict outcomes in experimental bargaining games. In particular, we show that under some conditions, a "sunk cost sensitive" fairness norm can evolve in such environments. Under this norm, a fair distribution allows all parties to recoup whatever each has invested in their relationship before the net surplus is then divided into equal shares. The establishment of such a norm would have important consequences for the hold-up problem, which we characterize in terms of ultimatum bargaining in the presence of an outside option. We then conclude with a brief discussion of the possible labor market implications of our results.sunk costs, norms, fairness, trust, hold-up problem, human capital

Why Punish: Social Reciprocity and the Enforcement of Prosocial Norms

Recently economists have become interested in why people who face social dilemmas in the experimental lab use the seemingly incredible threat of punishment to deter free riding. Three theories with evolvutionary microfoundations have been developed to explain punishment. We survey these theories and use behavioral data from surveys and experiments to show that the theory called social reciprocity in which people punish norm violators indiscriminately explains punishment best.social dilemma, punishment, norm, evolutionary game theory, experiment

Charity Auctions: A Field Experimental Investigation

Auctions are a popular way to raise money for charities, but relatively little is known, either theoretically or empirically, about the properties of charity auctions. The small theoretical literature suggests that the all-pay auction should garner more money than winner-pay auctions. We conduct field experiments to test which sealed bid format, first price, second price or all-pay raises the most money. Our experiment suggests that both the all-pay and second price formats are dominated by the first price auction. Our design also allows us to identify differential participation as the source of the difference between existing theory and the field. To conclude, we show that a model of charity auctions augmented by an endogenous participation decision predicts the revenue ordering that we see in the field.

Endogenous Participation in Charity Auctions

Data from a recent ?eld experiment suggests that differences in participation rates are responsible for much of the variations in revenues across formats in charity auctions. We provide a theoretical framework for the analysis of this, and other related, results. The model illustrates the limits of previous "?xed" results and introduces some new considerations to the choice of auction mechanism. It also implies, however, that the data cannot be explained in terms of participation costs alone: there must exist mechanism-speci?c obstacles to participation.