ps32007s2 - Psychology and Economics Problem Set 3 -...

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Unformatted text preview: Psychology and Economics Problem Set 3 - Suggested Solutions David Owens May 1, 2007 1. Researchers conducted a version of the standard dictator-game exper- iment (to be) discussed in class. Dictators were divided into two con- ditions. Condition I was a standard dictator-game experiment. Each dictator was paired with an anonymous recipient, and divided 10 Euros between herself and the recipient. Once the dictator made her decision, an experimenter called the recipient into a room, gave her the money, and explained to her that it had been allocated to her out of 10 Eu- ros by an anonymous other subject. (The dictators knew that all this would happen.) In Condition II, dictators had the possibility to “opt out.” If a dictator opted in, the same thing happened as in Condition I. If a dictator opted out, she received 10 Euros, and the recipient was simply excused from the experiment without being told anything. When dictators could not opt out, they shared 1.87 Euros on average. (This is typical for dictator-game experiments.) When they could opt out, they shared 0.58 Euros on average. While 61% share a positive amount in the standard dictator game without sorting, only 23% do so in the dictator game with sorting. (a) What does this experiment say about making conclusions from dictator-game experiments regarding people’s generosity in the real world? Generally, the experiment suggests that small changes in the envi- ronment can vastly alter people’s preferences for generosity. Sim- ply adding the ability to “opt out” decreased the amount given by 2 / 3 . Therefore, as the real world is different from the laboratory 1 setting, it is clear that laboratory results on giving should not be used to make quantitative predictions on giving decisions in the real world. More specifically, the results suggest that subjects take advantage of “moral wriggle room” allowed them by the design of the second experiment. It should be clear that a decision to opt out is the same as the decision to keep the entire amount to ones’ self, but the results suggest that subjects find the latter more repulsive than the former. (b) Argue that the results of this experiment are inconsistent with both categories of models of social preferences we have discussed in class (the distributional models and the intentions-based mod- els). As there is a one-to-one relationship between actions and outcomes in both conditions, the distributional and intentions-based models would make the same predictions in both experiments. In the dic- tator game, subjects know that the amount that they give is the amount that the other player will receive. This does not change when the option to opt out is added. Neither model predicts differ- ent decisions between the two conditions. The fact that different outcomes are observed suggests that there are differences between the two not accounted for in either the distributional or intentions- based models of social preferences. As stated above, a good candi-based models of social preferences....
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This homework help was uploaded on 04/20/2008 for the course ECON 119 taught by Professor K during the Spring '08 term at University of California, Berkeley.

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ps32007s2 - Psychology and Economics Problem Set 3 -...

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