Heterogeneous social preferences

Abstract

Recent research has shown the usefulness of social preferences in explaining behavior in laboratory experiments. This paper demonstrates that models of social preferences are particularly powerful in explaining behavior if they are embedded in a setting of heterogeneous actors with heterogeneous (social) preferences. For this purpose a simple model is introduced that combines the basic ideas of inequity aversion, social welfare preferences, reciprocity and heterogeneity. This model is applied to 43 games, and its predictive accuracy is clearly higher than that of the isolated approaches. Furthermore, it can explain most of the "anomalies" discussed in Goeree and Holt [Goeree, J., Holt, Ch.A., 2001. Ten little treasures of game theory and ten intuitive contradictions, American Economic Review 91, 1402-1422].

How much social insurance do you want? An experimental study

“…It is a general experience in experimental economics that social preferences seem to be rather differentiated with specific distributions in specific environments (e.g. Bolle et al, 2012;Cappelen et al, 2007;Daruvala, 2010;Engelmann & Strobel, 2004;Erlei, 2008). An alternative explanation is that randomly distributed income has a similar entitlement effect as earned income.…”

“…Such a broad mixture of motives has been observed also byEngelmann and Strobel (2004),Cappelen, Hole, Sorensen, and Tungodden (2007),Erlei (2008), andDaruvala (2010).3 Regimes with incentives to reduce income(Konrad, 1994) or not to invest in individual skills(Buchholz, Nett, & Peters, 1998) cause socially suboptimal results. 4 Compare Cappelen et al (2010) for a similar introduction of social norms into the utility function.…”

Fairness and food choice

“…Stated differently, unobservable heterogeneity is likely to be present across subjects. Indeed, Erlei (2008) recently pointed out the importance of heterogeneity of preferences and showed that it plays an important role in understanding laboratory behavior. Taken together, these considerations imply the following empirical model:…”

“…In response to these findings, several theoretical models were developed to describe the apparent observed pro-social behavior observed in different types of experiments (e.g., see Fehr and Schimdt, 1999;Bolton and Ockenfels, 2000;Charness and Rabin, 2002;Erlei, 2008;Konow, 2000). These models distinguish between two classes or types of pro-social preferences: distributive and reciprocal preferences.…”

The puzzle of cooperation in a game of chicken: an experimental study

“…This is, however, changing as evidence mounts from experiments confirming that agent homogeneity is the exception rather than the rule. For instance, some recent and stimulating empirical results on cooperation suggest that, even though a non negligible minority or even a majority of subjects exhibit self-interest maximizing preferences, a significant proportion also exhibit other-regarding preferences (Erlei 2008). Using data from a wide range of experiments, Gächter (2000) (cited in Camerer 2003) estimate that 40 to 66% of the subjects show a preference for reciprocity, while only 20 to 30% of them care about their sole monetary gains (the remaining subjects do not seem to have very clearly defined preferences).…”