Market Interaction and Pro‐Social Behavior: An Experimental Study

Abstract

When actions generate negative externalities for third parties, incentives exist to pass these “morally costly” decisions to others. In laboratory experiments, we investigate how market interaction affects allocations when the right to divide a sum of money between oneself and a passive recipient is commoditized. Allocation to recipients is reduced by more than half when determined by subjects who purchase or keep the right to make the division as compared to a control where subjects are directly assigned the right. Sellers report accurate beliefs about recipient allocations and do not report feeling less responsible the more often they sell the allocation right. The market allocates the right to make divisions more frequently to buyers who allocate more to recipients, but sellers who allocate less to recipients tend to sell less often. Selection cannot solely explain the results, suggesting market interaction itself may directly impact behavior.

Self-selecting into being a dictator: Distributional consequences

“…We find that in a different scenario where the alternative to be a dictator is delegating in an agent and not a fix payoff the less pro-social choose to allocate as a dictator and avoid sharing while the more pro-social delegate. The result in Collins et al (2018) is also among similar lines. That is, allocation decisions are lower when they are made by someone who bought or purchased the right to make the division compared to a subject who earned this privilege randomly.…”

“…One explanation could be that under endogenous delegation the principal can keep the right to make the decision. Along similar lines are Collins et al (2018) where entitlement over the power to divide an endowment affects the result. In our environment we could have that principals under endogenous delegation feel more entitled to share less than principals in the baseline or, as earlier mentioned, feel empowered when they self-select into the role.…”

Markets and the crowding out of conservation‐relevant behavior

“…Evidence from a number of studies employing experimental economic games suggests that the presence of markets lowers fair-minded behavior. For example, divisions were less equal under a market treatment when a dictator game (a 2-player game where 1 player divides a monetary allocation between themselves and a passive recipient) was used to examine how behavior was affected when the right to decide the division was assigned versus determined in a market treatment (Collins et al 2018). Likewise, reframing an ultimatum game (similar to dictator game, but where the recipient choses to accept or reject the proposed distribution, with the latter choice resulting in no payoff for either player) as a market game with sellers and buyers resulted in players allocating money less equitably (Hoffman et al 1994).…”

“…For example, external incentives can crowd out what is referred to as "image motivation" (i.e., engaging in prosocial behavior to improve ones' social image) (Ariely et al 2009). A review of experimental literature suggests prosocial behavior may be influenced by preferences for appearing to be fair (i.e., social image) rather than preferences for actual fairness (Collins et al 2018). In a conservation context, Australian farmers participating in reverse auctions for biodiversity conservation had mixed feelings about the receipt of public money to protect native vegetation (Tennent & Lockie 2013).…”

“…Emerging research suggests markets can also affect people's willingness to inflict indirect harm on others, often referred to as negative or third‐party externalities (Falk & Szech 2013; Collins et al. 2018). The evidence demonstrating a link between the influence of markets on people's willingness to inflict externalities stems from controlled laboratory experiments in which market conditions are emulated, but to date, none are from a conservation context.…”