Two Studies on the Interplay between Social Preferences and Individual Biological Features

Biological features and social preferences have been studied separately as factors influencing human strategic behaviour. We run two studies in order to explore the interplay between these two sets of factors. In the first study, we investigate to what extent social preferences may have some biological underpinnings. We use simple one-shot distribution experiments to attribute subjects one out of four types of social preferences: Self-interested (SI), Competitive (C), Inequality averse (IA) and Efficiency-seeking (ES). We then investigate whether these four groups display differences in their levels of facial Fluctuating Asymmetry (FA) and in proxies for exposure to testosterone during phoetal development and puberty. We observe that development-related biological features and social preferences are relatively independent. In the second study, we compare the relative weight of these two set of factors by studying how they affect subjects’ behaviour in the Ultimatum Game (UG). We find differences in offers made and rejection rates across the four social preference groups. The effect of social preferences is stronger than the effect of biological features even though the latter is significant. We also report a novel link between facial masculinity (a proxy for exposure to testosterone during puberty) and rejection rates in the UG. Our results suggest that biological features influence behaviour both directly and through their relation with the type of social preferences that individuals hold.

Optimal Contracts, Adverse Selection, and Social Preferences: An Experiment

It has long been standard in agency theory to search for incentive-compatible mechanisms on the assumption that people care only about their own material wealth. However, this assumption is clearly refuted by numerous experiments, and we feel that it may be useful to consider nonpecuniary utility in mechanism design and contract theory. Accordingly, we devise an experiment to explore optimal contracts in an adverse-selection context. A principal proposes one of three contract menus, each of which offers a choice of two incentive-compatible contracts, to two agents whose types are unknown to the principal. The agents know the set of possible menus, and choose to either accept one of the two contracts offered in the proposed menu or to reject the menu altogether; a rejection by either agent leads to lower (and equal) reservation payoffs for all parties. While all three possible menus favor the principal, they do so to varying degrees. We observe numerous rejections of the more lopsided menus, and approach an equilibrium where one of the more equitable contract menus (which one depends on the reservation payoffs) is proposed and agents accept a contract, selecting actions according to their types. Behavior is largely consistent with all recent models of social preferences, strongly suggesting there is value in considering nonpecuniary utility in agency theory.

Social preferences and skill segregation

This paper shows that models where preferences of individuals dependnot only on their allocations, but also on the well-being of otherpersons, can produce both large and testable effects. We study theallocation of workers with heterogeneous productivities to firms. Weshow that even small deviations from purely selfish preferences leadsto widespread workplace skill segregation. That is, workers ofdifferent abilities tend to work in di¤erent firms, as long as theycare somewhat more about the utilities of workers who are close .

Social preferences: Some simple tests and a new model

Departures from pure self interest in economic experiments have recently inspired models of "social preferences". We conduct experiments on simple two-person and three-person games with binary choices that test these theories more directly than the array of games conventionally considered. Our experiments show strong support for the prevalence of "quasi-maximin" preferences: People sacrifice to increase the payoffs for all recipients, but especially for the lowest-payoff recipients. People are also motivated by reciprocity: While people are reluctant to sacrifice to reciprocate good or bad behavior beyond what they would sacrifice for neutral parties, they withdraw willingness to sacrifice to achieve a fair outcome when others are themselves unwilling to sacrifice. Some participants are averse to getting different payoffs than others, but based on our experiments and reinterpretation of previous experiments we argue that behavior that has been presented as "difference aversion" in recent papers is actually a combination of reciprocal and quasi-maximin motivations. We formulate a model in which each player is willing to sacrifice to allocate the quasi-maximin allocation only to those players also believed to be pursuing the quasi-maximin allocation, and may sacrifice to punish unfair players.

Optimal contracts, adverse selection and social preferences: An experiment

It has long been standard in agency theory to search for incentive-compatible mechanisms on the assumption that people care only about their own material wealth. However, this assumption is clearly refuted by numerous experiments, and we feel that it may be useful to consider nonpecuniary utility in mechanism design and contract theory. Accordingly, we devise an experiment to explore optimal contracts in an adverse-selection context. A principal proposes one of three contract menus, each of which offers a choice of two incentive-compatible contracts, to two agents whose types are unknown to the principal. The agents know the set of possible menus, and choose to either accept one of the two contracts offered in the proposed menu or to reject the menu altogether; a rejection by either agent leads to lower (and equal) reservation payoffs for all parties. While all three possible menus favor the principal, they do so to varying degrees. We observe numerous rejections of the more lopsided menus, and approach an equilibrium where one of the more equitable contract menus (which one depends on the reservation payoffs) is proposed and agents accept a contract, selecting actions according to their types. Behavior is largely consistent with all recent models of social preferences, strongly suggesting there is value in considering nonpecuniary utility in agency theory.

Social Preferences and Transport Policy: The case of US speed limits

This article, in reviewing the longrunning US debate on speed limits, illustrates how a different valuation of the trade-off between private mobility needs and safety concerns can shape transport policies. It is argued that the regulatory decentralization debate, together with the speed limit in force in each state, obey the social preferences and valuation given to this tradeoff. Such a view is consistent with evidence that higher speed limits are to be found in states with greater private mobility needs, even though their fatality rates might be among the highest in the country. By contrast, lower speed limits and supporters of a low national speed limit are to be found in states that show a greater concern for safety outcomes and which are less dependent on private mobility. By reviewing these events and examining the role played by the main actors and analyzing their motivations, the article identifies important lessons for similar future discussions on transport policy.

A Neural Trait Approach to Exploring Individual Differences in Social Preferences

Research demonstrates that social preferences are characterized by significant individual differences. An important question, often overlooked, is from where do these individual differences originate? And what are the processes that underlie such differences? In this paper, we outline the neural trait approach to uncovering sources of individual differences in social preferences, particularly as evidenced in economic games. We focus on two primary methods—resting-state electroencephalography and structural magnetic resonance imaging—used by researchers to quantify task-independent, brain-based characteristics that are stable over time. We review research that has employed these methods to investigate social preferences with an emphasis on a key psychological process in social decision-making; namely, self-control. We then highlight future opportunities for the neural trait approach in cutting-edge decision-making research. Finally, we explore the debate about self-control in social decision-making and the potential role neural trait research could play in this issue.

The effects of stress on social preferences are sexually dimorphic in prairie voles.

Prairie voles (Microtus ochrogaster) are monogamous rodents that form pair bonds characterized by a preference for a familiar social partner. In male prairie voles, exposure to either the stress of swimming or exogenous injections of corticosterone facilitate the development of a social preference for a female with which the male was paired after injection or swimming. Conversely, adrenalectomy inhibits partner preference formation in males and the behavioral effects of adrenalectomy are reversed by corticosterone replacement. In female prairie voles, swim stress interferes with the development of social preferences and corticosterone treatments inhibit the formation of partner preferences, while adrenalectomized females form preferences more quickly than adrenally intact controls. Because sex differences in both behavior and physiology are typically reduced in monogamous species, we initially predicted that male and female prairie voles would exhibit similar behavioral responses to corticosterone. However, our findings suggest an unanticipated sexual dimorphism in the physiological processes modulating social preferences. This dimorphic involvement of stress hormones in pair bonding provides a proximate mechanism for regulating social organization, while permitting males and females to adapt their reproductive strategies in response to environmental challenges.

Tax morale and tax evasion: Social preferences and bounded rationality

We study a family of models of tax evasion, where a flat-rate tax finances only the provision of public goods, neglecting audits and wage differences. We focus on the comparison of two modeling approaches. The first is based on optimizing agents, who are endowed with social preferences, their utility being the sum of private consumption and moral utility. The second approach involves agents acting according to simple heuristics. We find that while we encounter the traditionally shaped Laffer-curve in the optimizing model, the heuristics models exhibit (linearly) increasing Laffercurves. This difference is related to a peculiar type of behavior emerging within the heuristics based approach: a number of agents lurk in a moral state of limbo, alternating between altruism and selfishness.

Adómorál és adócsalás - társadalmi preferenciák és korlátozott racionalitás = Tax morale and tax system: social preferences and bounded rationality

Az adócsalásnak egy olyan modellcsaládját vizsgáljuk, ahol az egykulcsos adó kizárólag a közjavakat finanszírozza. Két megközelítés összehasonlítására összpontosítunk. Az elsőben minden dolgozó jövedelme azonos, és ebből minden évben annyit vall be, amennyi maximalizálja a nála maradó jövedelemből fedezhető fogyasztás nyújtotta hasznosság és a jövedelembevallásból fakadó hasznosság összegét. A második hasznosság három tényező szorzata: a dolgozó exogén adómorálja, a környezetében előző évben megfigyelt átlagos jövedelembevallás és saját bevallásából fakadó endogén hasznossága. A második megközelítésben az ágensek egyszerű heurisztikus szabályok szerint cselekszenek. Míg az optimalizáló modellben hagyományos Laffer-görbékkel találkozunk, addig a heurisztikán alapuló modellekben (lineárisan) növekvő Laffer-görbék jönnek létre. E különbség oka, hogy a heurisztikán alapuló modellben egy sajátos viselkedésfajta jelentkezik: számos ágens ingatag helyzetbe kerül, amelyben altruizmus és önzés között ingadozik. ________ The authors study a family of models of tax evasion, where a flat-rate tax only finances the provision of public goods and audits and wage differences are ne-glected. The paper focuses on comparing two modelling approaches. The first is based on optimizing agents, endowed with social preferences, their utility being the sum of private consumption and moral utility. The second approach involves agents acting according to simple heuristics. While the traditionally shaped Laffer curves are encountered in the optimizing model, the heuristics models exhibit (linearly) increasing Laffer curves. This difference is related to a peculiar type of behaviour: within the agent-based approach lurk a number of agents in a moral state of limbo, alternating between altruism and selfishness.

Linking the ecosystem service approach to social preferences and needs in integrated coastal land use management - a planning approach

Coastal zones with their natural and societal subsystems are exposed to rapid changes and pressures on resources. Scarcity of space and impacts of climate change are prominent drivers of land use and adaptation management today. Necessary modifications to present land use management strategies and schemes influence both the structures of coastal communities and the ecosystems involved. Approaches to identify the impacts and account for (i) the linkages between social references and needs and (ii) ecosystem services in coastal zones have been largely absent. The presented method focuses on improving the inclusion of ecosystem services in planning processes and clarifies the linkages with social impacts. In this study, fourteen stakeholders in decisionmaking on land use planning in the region of Krummhörn (northwestern Germany, southern North Sea coastal region) conducted a regional participative and informal process for local planning capable to adapt to climate driven changes. It is argued that scientific and practical implications of this integrated assessment focus on multifunctional options and contribute to more sustainable practices in future land use planning. The method operationalizes the ecosystem service approach and social impact analysis and demonstrates that social demands and provision of ecosystem services are inherently connected.

Social capabilities in Alzheimer's patients

Patients with stage-I (very mild and mild) Alzheimer's disease were asked to participate in a Dictator Game, a type of game in which a subject has to decide how to allocate a certain amount of money between himself and another person. The game enables the experimenter to examine the influence of social norms and social preferences on the decision-making process. When the results of treatments involving Alzheimer's disease patients were compared with those of identical treatments involving patients with mild cognitive impairment or healthy control subjects, with similar ages and social backgrounds, no statistically significant difference was found. This finding suggests that stage-I Alzheimer's disease patients may be as capable of making decisions involving social norms and preferences as other individuals of their age. Whatever brain structures are affected by the disease, they do not appear to influence, at this early stage, the neural basis for cooperation-enhancing social interactions.

The significance of distributive effects in social assessment of health care

In this paper we address the importance of distributive effects in the social valuation of QALY's. We propose a social welfarefunction that generalises the functions traditionally used in the health economic literature. The novelty is that, depending on the individual health gains, our function can representeither preferences for concentrating or preferences for spreading total gain or both together, an issue which has notbeen addressed until now. Based on an experiment, we observe that this generalisation provides a suitable approximation tothe sampled social preferences.

Social capabilities in Alzheimer’s patients

Patients with stage-I (very mild and mild) Alzheimer s disease were asked to participatein a Dictator Game, a type of game in which a subject has to decide how to allocate acertain amount of money between himself and another person. The game enables theexperimenter to examine the influence of social norms and social preferences on thedecision-making process. When the results of treatments involving Alzheimer s diseasepatients were compared with those of identical treatments involving patients with mildcognitive impairment or healthy control subjects, with similar ages and socialbackgrounds, no statistically significant difference was found. This finding suggests thatstage-I Alzheimer s disease patients may be as capable of making decisions involvingsocial norms and preferences as other individuals of their age. Whatever brain structuresare affected by the disease, they do not appear to influence, at this early stage, the neuralbasis for cooperation-enhancing social interactions.