Cooperation and betrayal are universal features of social interactions, and knowing who to trust is vital in human society. Previous studies have identified brain regions engaged by decision making during social encounters, but the mechanisms supporting modification of future behaviour by utilizing social experience are not well characterized. Using functional magnetic resonance imaging (fMRI), we show that cooperation and betrayal during social exchanges elicit specific patterns of neural activity associated with future behaviour. Unanticipated cooperation leads to greater behavioural adaptation than unexpected betrayal, and is signalled by specific neural responses in the striatum and midbrain. Neural responses to betrayal and willingness to trust novel partners both decrease as the number of individuals encountered during repeated social encounters increases. We propose that, as social groups increase in size, uncooperative or untrustworthy behaviour becomes progressively less surprising, with cooperation becoming increasingly important as a stimulus for social learning. Effects on reputation of non-trusting decisions may also act to drive pro-social behaviour. Our findings characterize the dynamic neural processes underlying social adaptation, and suggest that the brain is optimized to cooperate with trustworthy partners, rather than avoiding those who might betray us.
The Roles of Incentives and Voluntary Cooperation for Contractual Compliance *Efficiency under contractual incompleteness often requires voluntary cooperation in situations where self-regarding incentives for contractual compliance are present as well. Here we provide a comprehensive experimental analysis based on the gift-exchange game of how explicit and implicit incentives affect cooperation. We first show that there is substantial cooperation under non-incentive compatible contracts. Incentive-compatible contracts induce best-reply effort and crowd out any voluntary cooperation. Further experiments show that this result is robust to two important variables: experiencing Trust contracts without any incentives and implicit incentives coming from repeated interaction. Implicit incentives have a strong positive effect on effort only under non-incentive compatible contracts.
This study relies on preference heterogeneity and locus of control research to hypothesize about the impact of control types on firm valuation. We investigate whether market participants discriminate between control types when making investment decisions. Our empirical results of Swiss data suggest that control types represent discrete governance contexts with a unique set of conditions each related to a different level of principal-principal agency costs. Specifically, we find that firms with family ownership and professional management are valued more highly relative to other control configurations and that owners can use board and share structures to signal good governance. Our study thus provides support for a psychological and socio-political perspective of principal-principal conflicts of interests and expropriation of minority investors.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.