Altruism and Reciprocity Miloš Fišar BPV_IEBE Introduction to Experimental and Behavioral Economics Wahrhaft selbstloses Handeln ist äußerst selten (oder tritt in Wirklichkeit überhaupt nie auf)" | Telepolis ALTRUISM What is ALTRUISM? •Merriam-Webster dictionary •unselfish regard for or devotion to the welfare of others •behavior by an animal that is not beneficial to or may be harmful to itself but that benefits others of its species • •Cambridge English dictionary •willingness to do things that ​bring ​advantages to ​others, ​even if it ​results in ​disadvantage for yourself • •origin •from French altruisme, •from Italian altrui 'somebody else', •from Latin alteri huic ' to another' • •in 19th century philosopher Auguste Comte began to use altruism as antonym to egoism • Auguste Comte - Wikipedia How to measure altruism? •Can you measure altruism when you see it? • •Self-Report Altruism Scale •ex-post or ex-ante measurement for altruism •20 (14 in adapted version) questions •answers 1=Never/Once/More than once/Often/5=Very often •measures •what subjects really did •what would they do • • • BPV_IEBE Introduction to Experimental and Behavioral Economics Self-Report Altruism Scale Rushton, P. C., R. (1981). The altruistic personality and the self-report altruism scale. Personality and Individual Differences, 2(4), 293-302. How altruistic are you? •https://wumarketing.eu.qualtrics.com/jfe/form/SV_aarYym8Bj8k9BtQ • How often would you exhibit the following behaviors? How often you exhibit the following behaviors? Adapted version of Self-Report Altruism Scale BPV_IEBE Introduction to Experimental and Behavioral Economics How often you exhibit the following behaviors? Your altruistic score - all BPV_IEBE Introduction to Experimental and Behavioral Economics Your altruistic score - gender BPV_IEBE Introduction to Experimental and Behavioral Economics Another way to measure altruism - Experiment •Experiments allow you to observe altruistic behavior (Andreoni, Harbaugh, & Vesterlund, 2010) • •Prisoner's Dilemma •Public Goods Game •Dictator/Ultimatum Game •Trust Game • • BPV_IEBE Introduction to Experimental and Behavioral Economics Prisoner's Dilemma BPV_IEBE Introduction to Experimental and Behavioral Economics https://youtu.be/t9Lo2fgxWHw Prisoner's Dilemma •standard game theory example originating in 1950 Flood-Dresher (quasi-)experiment (Flood 1952, 1958) • •there exist thousands of studies using PD in economics, psychology, political science, … • • BPV_IEBE Introduction to Experimental and Behavioral Economics Prisoners’ Dilemma •Cooperation is the key to success in the game (Kelly and Stahelski, 1970; Roth and Murningam, 1978; and other) • •Cooperation might be triggered by altruism but more likely by reputation (Kreps, et al., 1982). The participants cooperate if they believe there is a chance someone is actually altruistic. • •Andreoni and Miller (1993) found that 20% of subjects have to be altruistic to support equilibria findings •The conclusion is supported by other studies (e.g. Camerer and Weigelt, 1988; McKelvey and Palfrey, 1992; Andreoni and Samuelson, 2006) • BPV_IEBE Introduction to Experimental and Behavioral Economics Andreoni and Miller (1993) - found significant evidence for reputation Public Goods Game •Original: Marwell and Ames. "Experiments on the provision of public goods. I. Resources, interest, group size, and the free-rider problem." American Journal of sociology (1979) • •One of the most standard game in experimental economics. • •Each player contributes to common or private account. BPV_IEBE Introduction to Experimental and Behavioral Economics Public Goods Game •You play in groups of 4 players for 10 rounds. The composition of the group is the same in all 10 rounds. •At the beginning of each round, each player receives an endowment of 20 tokens and can decide how many tokens to contribute to the common project. •Each token contributed to the project will be multiplied by 2 and distributed equally among all 4 members of the group. Therefore, each player receives 0.5 tokens for each token contributed to the project by any member. • •Tokens not contributed to the common project are kept by the player. • BPV_IEBE Introduction to Experimental and Behavioral Economics Public Goods Game https://classex.uni-passau.de/bin/plugins/qrcode/genQR.php?qr=https%3A%2F%2Fclassex.uni-passau.de%2 Fbin%2Findex.php%3Fautomatic%3D9fX3kstFYxvRdaV2DcFMXg Login 1.go to: https://classex.uni-passau.de 2.choose: Masaryk University 3.choose: Introduction to Behavioral and Experimental Economics 4.choose: participant 5.enter password: IEBE2021 https://classex.uni-passau.de/bin/index.php?automatic=fwB8tmeRG-Ps_yHljj59WQ Public Goods Game – your results BPV_IEBE Introduction to Experimental and Behavioral Economics Public Goods Game – your results BPV_IEBE Introduction to Experimental and Behavioral Economics Public Goods Game •Original: Marwell, Gerald, and Ruth E. Ames. "Experiments on the provision of public goods. I. Resources, interest, group size, and the free-rider problem." American Journal of sociology (1979) • •One of the most standard game in experimental economics. • •Each player contributes to common or private account. Usually: •Each player gets same percentage of total private account contributions. •Contributions are multiplied by a coefficient >1. • •The group's total payoff is maximized when everyone contributes all of their tokens to the public pool. • •Dominant strategy is zero contribution by every player to common account g experimental results show a different story. •Results show, that average contribution is significantly above zero (Isaac and Walker, 1988; Isaac, Walker and Williams, 1994; Andreoni, 1988; Andreoni and Croson, 2008; Palfrey and Prisbrey, 1996) BPV_IEBE Introduction to Experimental and Behavioral Economics Public Goods Game •Applicable on charitable giving, fundraising, transportation etc. • •Treatment variations: •Opened communication in the middle of the experiment. •Possibility of punishment. •People do punish (¯contribution _punishment) and cooperation increases (Fehr Gächter, 2000) •“Counter fire“ lowers cooperation (Nikiforakis, 2008) •Stronger punishment increases contributions (Denant-Boemont, 2007) •Anonymous punishment is more efficient (Denant-Boemont, 2007) BPV_IEBE Introduction to Experimental and Behavioral Economics Public Goods Game •Any error or variance in data could be viewed as altruism (Ladyard, 1995) • •Experiments shown that: •Warm-glow dominates altruism (Palfrey and Prisbey, 1997) •Altruism dominates warm-glow (Goeree, Holt and Laury, 2002) •Both warm-glow and altruism are evident in PGG (Bolton and Katok, 1998; Eckel, Grossman and Johnston, 2005) • BPV_IEBE Introduction to Experimental and Behavioral Economics warm-glow = emotional reward of giving to others Ultimatum and Dictator Game •Ultimatum Game •Proposer and Responder bargain over a division of a given sum of money. I.Proposer: makes an offer how to split the sum II.Responder: accepts or rejects •if accepted they split the money •if rejected neither gets anything • • • •Dictator Game •Dictator and Recipient bargain over a division of a given sum of money. I.Dictator: splits the sum II.Recipient: is informed of endowment left by the dictator III. III. III. III. • BPV_IEBE Introduction to Experimental and Behavioral Economics Dictator Game •can send all, nothing or part of his endowment of 100 Euro to • •makes no decision BPV_IEBE Introduction to Experimental and Behavioral Economics https://classex.uni-passau.de/bin/pic/role2.png https://classex.uni-passau.de/bin/pic/role1.png https://classex.uni-passau.de/bin/pic/role2.png Dictator Game https://classex.uni-passau.de/bin/plugins/qrcode/genQR.php?qr=https%3A%2F%2Fclassex.uni-passau.de%2 Fbin%2Findex.php%3Fautomatic%3D9fX3kstFYxvRdaV2DcFMXg Login 1.go to: https://classex.uni-passau.de 2.choose: Masaryk University 3.choose: Introduction to Behavioral and Experimental Economics 4.choose: participant 5.enter password: IEBE2021 https://classex.uni-passau.de/bin/index.php?automatic=fwB8tmeRG-Ps_yHljj59WQ Dictator Game – your results BPV_IEBE Introduction to Experimental and Behavioral Economics Ultimatum and Dictator Game •Ultimatum Game •Proposer and Responder bargain over a division of a given sum of money. I.Proposer: makes an offer how to split the sum II.Responder: accepts or rejects •if accepted they split the money •if rejected neither gets anything • • •unique subgame perfect equilibrium the proposer suggests the responder the smallest amount possible and the responder accepts • •Dictator Game •Dictator and Recipient bargain over a division of a given sum of money. I.Dictator: splits the sum II.Recipient: is informed of endowment left by the dictator III. III. III. III. •unique subgame perfect equilibrium: the dictator takes it all • BPV_IEBE Introduction to Experimental and Behavioral Economics Dictator Game •Proposers choose a fair deal (Güth, Schmittberger and Schwarze, 1982) but is it altruism? •Answered by Forsythe, et al. (1994) by removing 2nd stage of the game: in average 25% of the endowment was shared • •Andreoni and Miller (2002) investigated altruism by gender •men are more likely to maximize total payments to both subjects •women are more likely to equalize payments to both •ð men are more altruistic when giving is cheap and women when it is expensive • • BPV_IEBE Introduction to Experimental and Behavioral Economics What factors drive the altruism •Culture (Roth et al., 1991; Henrich et al., 2001) • •Psychological development and socialization (Harbaugh and Krause, 2000) • •Our brain (Tankersley, Stowe and Huettel, 2007) BPV_IEBE Introduction to Experimental and Behavioral Economics Altruism is associated with an increased neural response to agency | Nature Neuroscience Trust Game •2 players; both receive same endowment • I.Player 1 (sender) may send some amount of his money to Player 2 (receiver) •whatever he/she sends will be tripled on the way II. II.Player 2 makes similar choice: •send some amount of the now-tripled money back to Player 1, or not • • • BPV_IEBE Introduction to Experimental and Behavioral Economics Trust Game (if there is time) https://classex.uni-passau.de/bin/plugins/qrcode/genQR.php?qr=https%3A%2F%2Fclassex.uni-passau.de%2 Fbin%2Findex.php%3Fautomatic%3D9fX3kstFYxvRdaV2DcFMXg Login 1.go to: https://classex.uni-passau.de 2.choose: Masaryk University 3.choose: Introduction to Behavioral and Experimental Economics 4.choose: participant 5.enter password: IEBE2021 https://classex.uni-passau.de/bin/index.php?automatic=fwB8tmeRG-Ps_yHljj59WQ Trust Game •2 players; both receive same endowment • I.Player 1 (sender) may send some amount of his money to Player 2 (receiver) •whatever he/she sends will be tripled on the way II. II.Player 2 makes similar choice: •send some amount of the now-tripled money back to Player 1, or not • •transfer of 0 is subgame perfect equilibria for sender •transfer of 0 is a dominant strategy for receiver BPV_IEBE Introduction to Experimental and Behavioral Economics Trust Game •Transfer from Player 2 is often slightly below average transfer from Player 1 (Berg, Dickhaut, McCabe, 1995) • •60% of senders and 42% receivers are motivated by altruism (Cox and Deck, 2005) • •reciprocity is clearly present in the Trust Game (Charness and Haruvy, 2002; Gneezy, Guth and Verboven, 2000) • • BPV_IEBE Introduction to Experimental and Behavioral Economics RECIPROCITY How Jerusalem's Old City taught me the UX Principle of Reciprocity | by Guillaume Galante | Prototypr What is RECIPROCITY? •Merriam-Webster dictionary •a situation or relationship in which two people or groups agree to do something similar for each other, to allow each other to have the same rights, etc. : a reciprocal arrangement or relationship • •Cambridge English dictionary •behavior in which two ​people or ​groups of ​people give each other ​help and ​advantages • •origin •from Latin reciprocus meaning returning. • BPV_IEBE Introduction to Experimental and Behavioral Economics Reciprocity •social rule that says that we should “repay“ • •differs from altruism in a manner that a response is expected • •Might be find in Hammurabi’s code (~1750 BC): •“If a man put out the eye of another man, his eye shall be put out.” • •Used make someone follow a rule • à e.g. law, wages are reciprocal • BPV_IEBE Introduction to Experimental and Behavioral Economics Hammurabi's Code - An Eye For An Eye - mrdowling.com Positive vs Negative Reciprocity •Positive •a motivation to adopt a generous action that benefits someone else, at one’s own material cost, because that person’s intentional behavior was perceived to be beneficial to oneself. • •Negative •a motivation to adopt an action that harms someone else, at one’s own material cost, because that person’s intentional behavior was perceived to be harmful to oneself BPV_IEBE Introduction to Experimental and Behavioral Economics Reciprocity in experiments •It is confirmed that direct positive reciprocity is frequent in experiments (Diekmann, 2004) • •40-66% of subjects display non-selfish behavior (Fehr and Gächter, 2000) • •Negative reciprocity is measured by means of a Moonlighting Game (Abbink et al., 2000) where one player can take money from other, who can punish in return BPV_IEBE Introduction to Experimental and Behavioral Economics Moonlighting Game •2 players •both endowed with $12 • I.Player 1 can: - take money (up to $6) from Player 2 - or transfer money (up to $6) to Player 2 (amount transferred is tripled) II.Player 2 can: -transfer money (up to 18) to Player 1 -or spend money (up to 6) to reduce Player 1’s payoff (by three times the amount spent) • •subgame perfect equilibrium: •Player 1 will take the maximum possible amount from Player 2 •Player 2 will neither punish nor return any money BPV_IEBE Introduction to Experimental and Behavioral Economics Abbink, K., Irlenbusch, B., & Renner, E. (2000). The moonlighting game: An experimental study on reciprocity and retribution. Journal of Economic Behavior & Organization, 42(2), 265-277. Moonlighting Game • • BPV_IEBE Introduction to Experimental and Behavioral Economics http://ars.els-cdn.com/content/image/1-s2.0-S0167268100000895-gr2.jpg Abbink, Irlenbusch, & Renner (2000) Moonlighting Game •retribution (punishment for breaking the contract) is more compelling than reciprocity because the hostile actions are punished more often than friendly actions rewarded (Abbink, Irlenbusch, & Renner, 2000) • •first players are not afraid of negative reciprocity (Cox et al., 2002) BPV_IEBE Introduction to Experimental and Behavioral Economics Bribery Game •Essential characteristic of corruption is reciprocity •Both negative and positive •2 (Abbink et al., 2002) or 3 player game (Alatas et al., 2009) • •Player 1 “FIRM” may offer a bribe •Player 2 “OFFICIAL” either rejects or accepts it •Player 3 “CITIZEN” may punish Výsledek obrázku pro bribery BPV_IEBE Introduction to Experimental and Behavioral Economics Bribery Game BPV_IEBE Introduction to Experimental and Behavioral Economics Bribery Game •Reciprocity and trust may lead to stable exchange of benefits (corruption) even when own payoffs are not maximized (Abbink et al., 2002) • •Women are less likely to offer bribes and more likely to punish corruption but it varies across countries. Variation might be explained by different roles of women (Alatas et al., 2009). • •However, we found that women are less likely to offer bribes and less likely to punish corruption (Fišar, et al., 2016). • BPV_IEBE Introduction to Experimental and Behavioral Economics Is altruism and reciprocity only human’s domain? • http://www.ted.com/talks/laurie_santos • • Chen, M. K., Lakshminarayanan, V., & Santos, L. R.. (2006). How Basic Are Behavioral Biases? Evidence from Capuchin Monkey Trading Behavior.Journal of Political Economy, 114(3), 517–537. BPV_IEBE Introduction to Experimental and Behavioral Economics Thank you for your attention •If you have any question, feel free to ask in the Teams Group or write me an email: milos.fisar@wu.ac.at Literature •Abbink, K., Irlenbusch, B., & Renner, E. (2000). The moonlighting game: An experimental study on reciprocity and retribution. Journal of Economic Behavior & Organization, 42(2), 265-277. •Abbink, K., Irlenbusch, B., & Renner, E. (2002). An experimental bribery game. Journal of Law, economics, and organization, 18(2), 428-454. •Andreoni, J. (1988). Privately provided public goods in a large economy: the limits of altruism. Journal of public Economics, 35(1), 57-73. •Andreoni, J., & Croson, R. (2008). Partners versus strangers: Random rematching in public goods experiments. Handbook of experimental economics results, 1, 776-783. •Andreoni, J., & Miller, J. (2002). Giving according to GARP: An experimental test of the consistency of preferences for altruism. Econometrica, 70(2), 737-753. •Andreoni, J., & Miller, J. H. (1993). Rational cooperation in the finitely repeated prisoner's dilemma: Experimental evidence. The economic journal, 103(418), 570-585. •Andreoni, J., & Samuelson, L. (2006). Building rational cooperation. Journal of Economic Theory, 127(1), 117-154. •Andreoni, J., Harbaugh, W. T., & Vesterlund, L. (2010). Altruism in experiments. In Behavioural and experimental economics (pp. 6-13). Palgrave Macmillan, London. •Bolton, G. E., & Katok, E. (1998). An experimental test of the crowding out hypothesis: The nature of beneficent behavior. Journal of Economic Behavior & Organization, 37(3), 315-331. •Camerer, C., & Weigelt, K. (1988). Experimental tests of a sequential equilibrium reputation model. Econometrica: Journal of the Econometric Society, 1-36. •Chen, M. K., Lakshminarayanan, V., & Santos, L. R.. (2006). How Basic Are Behavioral Biases? Evidence from Capuchin Monkey Trading Behavior.Journal of Political Economy, 114(3), 517–537. •Cox, J. C., & Deck, C. A. (2005). On the nature of reciprocal motives. Economic Inquiry, 43(3), 623-635.Alatas et al., 2009) •Denant-Boemont, L., Masclet, D., & Noussair, C. N. (2007). Punishment, counterpunishment and sanction enforcement in a social dilemma experiment. Economic theory, 33(1), 145-167. •Diekmann, A. (2004). The power of reciprocity: Fairness, reciprocity, and stakes in variants of the dictator game. 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Fairness in simple bargaining experiments. Games and Economic behavior, 6(3), 347-369. •Goeree, J. K., Holt, C. A., & Laury, S. K. (2002). Private costs and public benefits: unraveling the effects of altruism and noisy behavior. Journal of public Economics, 83(2), 255-276. •Güth, W., Schmittberger, R., & Schwarze, B. (1982). An experimental analysis of ultimatum bargaining. Journal of economic behavior & organization, 3(4), 367-388. •Harbaugh, W. T., & Krause, K. (2000). Children's altruism in public good and dictator experiments. Economic Inquiry, 38(1), 95-109. •Henrich, J., Boyd, R., Bowles, S., Camerer, C., Fehr, E., Gintis, H., & McElreath, R. (2001). In search of homo economicus: behavioral experiments in 15 small-scale societies. American Economic Review, 91(2), 73-78. •Isaac, R. M., & Walker, J. M. (1988). Communication and free‐riding behavior: The voluntary contribution mechanism. Economic inquiry, 26(4), 585-608. •Isaac, R. M., & Walker, J. M. (1988). 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The altruistic personality and the self-report altruism scale. Personality and Individual Differences, 2(4), 293-302. •Tankersley, D., Stowe, C. J., & Huettel, S. A. (2007). Altruism is associated with an increased neural response to agency. Nature neuroscience, 10(2), 150-151. BPV_IEBE Introduction to Experimental and Behavioral Economics