week11b - Social preferences Bargaining and experiments ECON 404 Behavioral Economics 1 Econ 404 Brian W Rogers 2015 by Brian W Rogers Roadmap Quick

week11b - Social preferences Bargaining and experiments...

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© 2015 by Brian W. Rogers ECON 404 Behavioral Economics Social preferences: Bargaining and experiments
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Econ 404 – Brian W. Rogers 2 Roadmap •Quick wrap-up on self-control •-------------------- •Social (“other-regarding”) preferences •Subgame perfection •Ultimatum game •Dictator game
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Econ 404 – Brian W. Rogers 4 Willpower depletion •Interesting and relatively recent area of research on temptation and self-control Willpower is a scarce resource Once consumed, one is more susceptible to temptation •Some intriguing experiments in psychology
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Econ 404 – Brian W. Rogers 5 Affect versus cognition (Shiv & Fedorikhin 1999) •DM enters room 1 •Asked to remember a number to be repeated in room 2 •Walks to room 2 past snack options Chocolate cake Fruit salad •Four treatments: Available processing (cogntition/willpower) capacity Low (7 digit number) High (2 digit number) Presentation mode Real Symbolic (photographs of the food)
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Econ 404 – Brian W. Rogers 6 Main results •When food was “real”, chocolate goes from 63% to 41% for 7-digit vs. 2-digit number
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Econ 404 – Brian W. Rogers 7 Follow ups •Additional work seeks to confirm that willpower is a scarce biological resource •Leverage the idea that cognition uses brainpower , which uses glucose •Measure glucose levels before and after cognitive tasks and correlate this with temptation problems Results basically supportive but mixed
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Econ 404 – Brian W. Rogers 8 Summary: temptation & self-control • There is evidence of demand for commitment Getting people to pay for it is hard • Also, evidence that people are over-optimistic about their ability to overcome temptation • There is evidence that demand for commitment is correlated with present-bias • Some recent evidence on willpower Could present a link between poverty and self-control
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Econ 404 – Brian W. Rogers 9 Other-regarding preferences •In a standard formulation, DMs care about outcomes only insofar as the outcome affects their well-being “People are selfish” •In particular, DMs don’t exhibit any: Altruism Reciprocity/spite Envy Sense of fairness Dislike of inequality •This seems very restrictive
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Econ 404 – Brian W. Rogers 10 Selfishness •Having “social preferences” stands in contrast to a standard assumption of “selfishness” •But there is nothing irrational about non-selfish preferences As always, we attempt to be agnostic about intrinsic preferences •But “social preferences” is a behavioral economics topic because it falls outside of classical choice theory assumptions
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Econ 404 – Brian W. Rogers 11 A few thought experiments (Do we have social preferences?) • Would you pay for your kids to go to college? • If you had $1000 to distribute to people at a homeless shelter, would you prefer to give $1000 to one person or $100 to each of 10 people?
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