The importance of moral reflection and self-reported data in a dictator game with production

This article studies how individual behavior is affected by moral reflection in a dictator game with production. We make individuals reflect on fairness, in a structured way, before they play the dictator game. Our results suggest that moral reflection not only increases the weight people attach to fairness in distributive choices, but also has a strong effect on what people consider fair. Furthermore, we study the informational value of self-reported data. We find that self-reported data have substantial informational value, but do not add explanatory power to a random utility model estimated on purely behavioral data. Finally, we study whether there is a self-serving bias in the participants’ fairness perceptions, but do not find much evidence of this phenomenon in the data.     

Exploiting one’s power with a guilty conscience: An experimental investigation of self-serving biases

In our experimental investigation powerful managers use their discretion power to their own advantage and admit that their behavior is unfair. This contradicts studies stressing self-serving biases. Self-serving biases are often identified by asking people what fairness standards apply in situations with alternative income distributions. Nevertheless, when the response to a question is connected with a distributional decision, only the reply, but not necessarily the fairness standard, is biased. Social preference models envisage decisions as a compromise between self-interest and social concerns (norms). A model-based estimation of social concerns, as provided by this paper, is capable of identifying different sorts of self-serving biases. Higher income triggers higher fairness scores, but there are no indications that a relatively higher income compared to the peers is generally perceived as fairer than a relatively lower income.     

The Self-serving Bias and Beliefs about Rationality

Most previous experiments attempting to establish the existence of the self-serving bias have confounded it with strategic behavior. We design an experiment that controls for strategic behavior (Haman effects) and isolates the bias itself. The self-serving bias that we measure concerns beliefs about the rationality of others. We find very limited support for the existence of the bias. To help understand why the bias seems to hold in some settings but not in others, we discuss a distinction between biases that are self-serving and those that are actually self-defeating. (JEL C92 )     

Behavioral economic phenomena in decision-making for others

We examine whether biases identified in the behavioral-economics literature apply in decision-making for others (DMfO). We conduct a laboratory experiment in which subjects make decisions on behalf of themselves and others in eighteen tasks that measure the following biases: present-bias in time preferences, reflection effect in risk preferences, compound risk aversion, decoy effect, anchoring bias, endowment effect, and identifiable-victim bias. In our experiment, DMfO is DMfO simpliciter: unincentivized decisions made by one individual on behalf of another–the individual making decisions faces no direct costs or benefits when engaging in DMfO (as she would in a principal-agent framework or with bequest motives), and DMfO is not framed as giving advice or guessing others’ behavior. Although we find that DMfO is by and large statistically indistinguishable from decisions for oneself, we identify the following self-other discrepancies: (i) willingness to pay (i.e., bids to procure goods and donations to charity) is higher in DMfO than in decisions for oneself in tasks associated with the anchoring bias, end owment effect, and identifiable-victim bias; and (ii) the propensity to give uninterpretable responses is higher in DMfO than in decisions for oneself. We also find order effects, with DMfO more similar to decisions for oneself when DMfO follows decision making for oneself. Lastly, in response to open-ended items soliciting self-reports of subjects’ approach to DMfO, most subjects report having followed some version of the “Golden Rule” (e.g., deciding for others as they would for themselves) or having tried to maximize the other subject’s payment or utility; very few subjects report motivations that can be construed as rivalrous.     

Testing models of information avoidance with binary choice dictator games

Standard social choice experiments generally force subjects to make decisions about giving money to another person, but the ability to avoid information outside of the lab could lead to less altruistic or fair behavior than such experiments tend to suggest. I expand on the design of Dana, Weber, and Kuang (2007) to better study information avoidance in an experimental setting. Subjects are given the chance to avoid information about a recipient’s payoffs in a dictator game. I vary the probability that a dictator’s payoffs will be aligned with the recipient’s in order to assess the role of beliefs on avoidance and test contradictory models. The within-subjects approach shows that even people who are generous in a stark choice will make self-serving decisions when they can avoid knowing the recipient’s outcome. People avoid information more often when the self-serving choice is unlikely to hurt the recipient, which supports Rabin’s model (1995) of moral rules and moral preferences.     

Moral values and increasing stakes in a dictator game

Using data from a large representative US sample (N = 1519), we compare hypothetical moral fairness values from the Moral Foundations Sacredness Scale with actual fairness behavior in an incentivized dictator game with either low or high stakes. We find that people with high moral fairness values fail to live up to their high fairness standards, when stake size increases. This violates principles from consistency theories according to which moral values are supposedly aligned with moral behavior, but is in line with temptation theories that question the absoluteness of morality values.     

Risk preferences after a typhoon: An artefactual field experiment with fishers in the Philippines

When are risk preferences stable and when do they change? In general, individual preferences tend to be consistent across time and space but extreme shocks, such as natural disasters, appear to change how people make economic decisions. We conduct an artefactual field experiment with fishers on a remote island in the Philippines and investigate the effect of Typhoon Bopha on risk preferences, along with fairness and time preferences. The typhoon destroyed coral reefs and reduced populations of fish, weakening food security. Comparing individuals from communities that were directly hit by the typhoon with those that were not, we observe evidence that those affected by the typhoon are less risk averse. Stratifying our sample by gender, we observe strong evidence that females affected by the typhoon are more risk-loving than females unaffected by the typhoon. These results are consistent with the hypothesis that extreme negative events cause individuals to be more willing to accept greater risk in return for a larger financial reward.     

Commitment to tax compliance: Timing effect on willingness to evade

Experimental and empirical literature on individual decision-making has shown a remarkable difference between planning and ongoing decisions: when asked to plan their actions, people overweight events with low probability; on the contrary, in ongoing decisions, they tend to ignore them. We report on a laboratory experiment designed to explore the presence of this decisional inconsistency in taxpayers’ behavior, by means of a commitment system for compliance. In line with the overweighting of events with small probabilities (i.e. fiscal audits), we find that planning induces the majority of people not only to adopt a mechanism of commitment to tax compliance, but also to actually comply.     

Demand for decision autonomy and the desire to avoid responsibility in risky environments: Experimental evidence

This paper experimentally studies individuals’ willingness to pay for the authority to make risky decisions for themselves, and the willingness to take responsibility for others, as primary determinants of leadership willingness. We consider a setup involving a pair of individuals, where one individual is designated to make both parties’ decisions by default. Depending on treatment, either party can express a willingness to pay to change this situation. If one’s willingness to pay to make her own decision herself is positive (negative), we interpret it as a demand for autonomy (a desire to delegate). On the flip side, if one’s willingness to pay to avoid making a decision on behalf of another person is positive (negative), we interpret it as a desire to avoid responsibility (a demand for authority). We find that on average, individuals are willing to pay positive amounts of money to make their decisions themselves, and incur positive but smaller opportunity costs for the right to make decisions for others. Certain individual and contextual characteristics emerge as important predictors. Notably, (1) men are more likely to demand both autonomy and authority at the same time, (2) individuals with other regarding preferences are more likely to pay to avoid taking responsibility for others’ decisions when the probability of loss is high. Exploring differences between individuals’ own decisions and the decisions they make on behalf of others, we find that subjects with other-regarding preferences tend to “cautious-shift” when making decisions on behalf of others. Also, we find that individuals who would like to avoid responsibility also tend to “shift” their decisions when put in a decision-making role. The results have implications for the allocation of decision-making authority in pairs and leadership.     

Self-Interest and Civilians' Attitudes Toward the Vietnam War

The possible consequences of self-interest on American publicopinion were examined in the context of the United States militaryinvolvement in Vietnam Civilians' personal connections to thewar, in terms of their friends' and relatives' military service,did make them pay more attention to the war, but such connectionsseemed to have only weak effects on the salience of the waras a political issue. Similarly, there was no evidence thatthe self-interested had distinctively self-serving policy attitudestoward the war. Rather, the more important determinants of attitudestoward the war were attitudes toward various political symbolsassociated with the war. Finally, self-interest made very littledifference in enhancing the consistency of partisan attitudesinvolved in the 1968 presidential decision.     

On “lab rats”

Experimental subjects usually self-select to the laboratory and this may introduce a bias to the conclusions derived from observing their behavior. We analyze data stored by a subject-pool management program at an experimental laboratory and speculate about the effect of individual decisions on returning. Specifically, we test whether experience and earnings in previous sessions together with demographic variables explain the decision to return to the laboratory. We find that males and (in monetary terms) well-performing subjects are more likely to participate in experiments again.     

Old age and prosocial behavior: Social preferences or experimental confounds?

Experimental and field evidence indicate a positive link between social preferences and age, most strikingly between the elderly and young adults. However, it is possible that the seemingly positive link between age and preferences stems from confounds in experimental procedure. In a dictator game study we find that elderly participants do indeed transfer higher shares of their endowments to their peers than a standard sample of student participants. This result holds good even in treatments accounting for wealth differences and experimenter demand effects. However, we observe no difference in behavior when we compare elderly participants and students who have not previously participated in economic experiments. Accordingly, it is possible that the seemingly stronger social preferences of the elderly are due to confounds associated with lack of experience with economic experiments. In addition, when comparing incentivized and hypothetical transfer decisions, we observe a hypothetical bias in treatments with a “take” framing, but not in treatments with the standard “give” framing.     

Fairness judgments in household decision making

The behavioral economic study of fairness was applied to household decision making. A sample of household partners judged the fairness of a number of hypothetical decisions of a household partner, varying in the context of the decision. Decisions made by the partner to make a large personal expenditure or to reduce time spent on household chores were considered by the subjects as more fair if the outcome was framed as a forgone gain then if it was framed as a straight loss. Partners’ decisions to reduce household chores were also considered as more fair in the case of overtime work than when the partner received a salary increase or windfall income. We conclude that asymmetric valuation of losses and forgone gains, and (behavioral) costs as compared with income increase of the partner, influenced the fairness judgments concerning the partner’s behavior.     

Behavior in the loss domain: An experiment using the probability trade-off consistency condition

In gambles with two or more outcomes, the two versions of prospect theory, i.e., original prospect theory and cumulative prospect theory, make use of different composition rules and therefore yield different valuations of gambles. We test these composition rules in the loss domain using the probability trade-off consistency condition. The probability trade-off consistency condition offers a convenient and efficient way to compare gambles under risk and decision makers’ behavior. Experimental findings suggest that the rank dependent version of prospect theory, or cumulative prospect theory, cannot be rejected in the loss domain while original prospect theory is clearly rejected when a certainty effect is taken into account.     

Fairness and reputation effects in a provision point contributions process

This article reports on an investigation of how issues of fairness and reputation affect individual contributions in a group decision-making setting. In the context of a threshold public goods provision experiment, treatments were performed to determine how individuals react to limited and unlimited information about the contributions of other group members. Experimental results show that revealing anonymous information about individual contribution behavior caused a concern about equity, which led to decreased average contributions and a higher variance in contributions. These effects were partially offset when individual-specific contribution information was displayed. In their conclusion, the authors discuss how the results apply to different fundraising environments.     

Moral sentiments and social choice

We examine the implications, for social choice, of individuals having an intrinsic sense of fairness. Taking the viewpoint that social justice reflects the moral attitudes of the constituent members, we analyze the effect of the intensity of the individual sense of fairness on the solution of Nash bargaining over random allocation procedures. We use a stylized model of university admission policies to illustrate our approach. We show that even if social policies are ultimately determined by the bargaining power of the different groups, a society whose members have a common notion of fairness tends to implement fairer admission policies when the intensity of the sense of fairness of individual members increases. While working on the research that is summarized in this paper the authors visited several institutions. Edi Karni visited the Berglas School of Economics, Tel Aviv University and GRID, at Ecole Normale Superieur de Cachan. Zvi Safra visited CERMCEM and EUREQua, at the University of Paris I and LIP6, at the University of Paris 6. The hospitality of these institutions is gratefully acknowledged. We are also grateful to the editor and two anonymous referees for their very useful comments and suggestions. Zvi Safra thanks The Israel Science Foudation (grant 1299/05) for its support.     

Multi-platform experiment to cross a boundary between laboratory and real situational studies: experimental discussion of cross-situational consistency of driving behaviors

We constructed an innovative experimental platform to study cross-situational consistency in driving behavior, conducted behavioral experiments, and reported the data obtained in the experiment. To discuss cross-situational consistency, we separated situations in which people use some systems to conduct tasks into three independent conceptual factors: environment, context, and system. We report the experimental results with the following systems: a laboratory system with a gaming controller and steering/pedal controllers and a real system, COMS an instrumented vehicle. The results are summarized as follows. 1) The individual behaviors in each system were stable, and consistency was retained. 2) The consistency of the behaviors was also confirmed when the participants drove using different interfaces in identical systems. 3) However, only slight correlation was observed across different systems in a specific situation where a strong high-order cognitive constraint (i.e., rapid driving) and a weak low-order cognitive constraint (driving with easy handling toward a straight-line course) were given.     

Paying for no reason? (Mis-)perceptions of product attributes in separate vs. joint product evaluation

Consumer decision-making involves the evaluation of options either in isolation or in relation to other alternatives present at the environment. According to Hsee’s evaluability hypothesis, it is easier to evaluate product attributes when they are juxtaposed (i.e., presented jointly) than when they are presented in isolation from each other. Recent research has provided some support to the evaluability hypothesis for the attribute of perceived product quantity. The present research tests the hypothesis in relation to the attribute of perceived fairness. In two experiments, we show that when participants evaluate products in isolation from each other, they err in their judgment of product quantity, and, consequently, they mis-attribute fairness to the seller. In a third experiment, we further show that the inclusion of constant yet unfair price information does not affect the fairness and price judgments. These findings provide evidence for the psychological plausibility of the evaluability hypothesis for the attributes of fairness and product quantity. Moreover, they suggest that isolated product evaluation may be systematically suboptimal for consumers, even when pricing information is included. Therefore, effective consumer decision-making will benefit by allowing the joint evaluation of alternatives.     

What Makes Inheritance Fair in Stepfamilies? Examining Perceptions and Complexities

This article examines the complexity of fairness in the inheritance process within the context of divorce, remarriage, and stepchildren. Interpersonal social justice theory and qualitative vignette methods were used to explore family members' perceptions of fair inheritance outcomes and processes for financial assets and personal possessions. Findings identify decision rules for determining fair outcomes, including treating biological and stepchildren equally and differently. Who participates, what structures are relied upon, the role of information, and ethical interpersonal treatment were identified as key factors when determining fair processes. Understanding fairness provides a sound basis for helping stepfamily members navigate unavoidable inheritance decisions.     

ELECTORAL POLITICS AND THE EXECUTIVE VETO: A PREDICTIVE THEORY

We argue that winner-take-all voting in states and the unequal distribution of electoral votes across states in presidential elections makes incumbent presidents rationally place more weight on the preferences of voters in closely contested, larger states when making policy decisions. This hypothesis is tested by examining whether presidential veto decisions are influenced by the floor votes of senators from these electorally crucial states. In a pooled sample of 325 individual bills from 1970 through 1988, we find significant evidence of this behavior by incumbent presidents.