Reciprocity, Trust and Cooperation

Transcription

1 Reciprocity, Trust and Cooperation Lasha Lanchava September 8, 2015

2 Reciprocity and Gift Exchange A man ought to be a friend to his friend and repay gift with gift. People should meet smiles with smiles and lies with treachery. 13th century Nordic poem

3 Questions we will try to answer Are humans reciprocal by nature? Does reciprocity environments? Is reciprocity just a laboratory artifact? Are reciprocal reactions asymmetric? Does the extent of reciprocal behavior depend on the nature of the gift? vanish in high stakes competitive

4 Fehr et al. (1997): Reciprocity as a Contract Enforcement Device Three treatments WRT a weak reciprocity treatment NRT a no reciprocity treatment SRT a strong reciprocity treatment

5 Fehr et al. (1997): Reciprocity as a Contract Enforcement Device (WRT) Consider following one-period labor market game: L risk neutral workers N risk neutral firms (N<L) During the first stage contracts are concluded (ω, ê, f) During the second stage: workers choose an effort level e s.t. e [0,1]; c (e)>0; c(0)=0. Random mechanism determines the verifiability of shirking with probability s. In case worker is caught shirking, she pays f

6 Fehr et al. (1997): Reciprocity as a Contract Enforcement Device (WRT) If e ê, worker is paid ω, otherwise she receives ω with probability s and ω f with probability 1-s The expected utility for non-shirking worker is: = ω While if she shirks EU is given by: = 1 s [ω ] + s[ω f] No worker will ever choose e > ê. Why? If the worker decides to shirk, she will do so fully. Why? What condition must hold for her to perform at ê?

7 Fehr et al. (1997): Reciprocity as a Contract Enforcement Device (WRT) Firm s profit when dealing with a non-shirking worker is: = ω)ê Experimenter sets exogenous upper bound f0 e0 s.t. f = The equilibrium contract is given by: = ω = ; ê = e = f ;f =f ω = ω ω = ;

8 Fehr et al. (1997): Reciprocity as a Contract Enforcement Device (SRT) The expected utility for non-shirking worker is: = [ω ê ]p While if she shirks EU is given by: = [ 1 s [ω ] + s ω f)]p And firm s profit is: = ω)ê k(p) s.t. k (p)<0 if p (0,1); k (p)>0 if p (1,2); k(p)=0 if p=1;

9 Fehr et al. (1997): General Predictions In the WRT it is expected that firms will induce worker s reciprocal behavior by offering greater than zero rents (higher than in the NRT). In the SRT firms can either punish or reward the workers. Workers may anticipate reciprocal behavior of firms. In turn, firms may capitalize on workers expectations and demand and enforce higher effort levels.

10 Fehr et al. (1997): Experimental Procedures NRT and WRT consisted of two stages and lasted for 16 periods. SRT consisted of three stages and lasted for 12 periods. Information condition was implemented to make sure that experimental parameters were common knowledge. Subjects were quizzed with hypothetical examples to make sure they calculated monetary gains of their own and their partners correctly.

11 Fehr et al. (1997): Experimental Parameters =120; f0= 10; s = 0.5. Fehr et al. (1997) r, ê, f =,., In the NRT ê was set at 0.2

12 Fehr et al. (1997): Experimental Parameters The SRT was similar to the WRT, and: Fehr et al. (1997) Equilibrium prediction in the SRT is identical to that of the WRT, that is: r,ê,f =,.,

13 Fehr et al. (1997): Results Anticipation of worker s reciprocity has an impact on contract terms, inducing firms to demand high effort levels. Fehr et al. (1997)

14 Fehr et al. (1997): Results The impact is not driven by firms expectations of workers being risk averse. Fehr et al. (1997)

15 Fehr et al. (1997): Results Higher demand for effort results in higher rents. Fehr et al. (1997)

16 Fehr et al. (1997): Results Workers reciprocate higher rents with higher effort levels. Fehr et al. (1997)

17 Fehr et al. (1997): Results Workers reciprocate higher rents with higher effort levels. Fehr et al. (1997)

18 Fehr et al. (1997): Results Firms pay higher rents in the WRT compared to the NRT. Fehr et al. (1997)

19 Fehr et al. (1997): Results High effort/high rent strategy yields on average higher profits. Fehr et al. (1997)

20 Fehr et al. (1997): Results Firms demand and workers exert higher effort levels in SRT compared to WRT Fehr et al. (1997)

21 Fehr et al. (1997): Results Firms punished shirking and rewarded nonshirking. Fehr et al. (1997)

22 Fehr et al. (1997): Results Workers anticipated firms reciprocal behavior. Although, they underestimated the extent of reciprocal punishments. Fehr et al. (1997)

23 Fehr et al. (1997): Results The rate of shirking was lower in the SRT relative to the WRT. Fehr et al. (1997)

24 Fehr et al. (1997): Results Firms and workers end up, on average, with higher payoffs in the SRT than in the WRT. Fehr et al. (1997)

25 Fehr et al. (2002): Do High Stakes and Competition Undermine Fairness? Two market systems: Complete Contract Market (CCM) Gift Exchange Market (GEM) Tow treatments: High stakes (equivalent of two-three months of income) Normal stakes High stakes/10

26 Fehr et al. (2002): Results The wage (rent) offered to workers is not affected by stake size. Fehr et al. (2002)

27 Fehr et al. (2002): Results Likewise, the stake size does not affect the extent of effort provision. Fehr et al. (2002)

28 Gneezy and List (2006): Testing for Reciprocity in the Field Real effort task Emphasis on duration

29 Gneezy and List (2006): Experiment #1 Subjects were recruited to digitize library holdings. The recruitment poster offered $12 pay. Two treatments: nogift: as promised, subjects were paid $12 per hour Gift: subjects were paid a surprise of $20 per hour.

30 Gneezy and List (2006): Experiment #1 Results While there is a compelling evidence for gift exchange during the first few hours of the experiment, the reciprocal behavior wanes over time. Gneezy and List (2006)

31 Gneezy and List (2006): Experiment #2 Subjects were recruited to fundraise door-to-door. The recruitment poster offered $10 pay. Two treatments: nogift: as promised, subjects were paid $10 per hour Gift: subjects were paid a surprise of $20 per hour.

32 Gneezy and List (2006): Experiment #2 Results The effort level is higher during the initial phase of the experiment and dissipates over time. Gneezy and List (2006)

33 Gneezy and List (2006): Experiment #2 Results Is this result caused due to subject exhaustion? Gneezy and List (2006)

34 Kube et al. (2006): Positive vs. Negative Reciprocity Subjects were recruited to digitize library holdings (a task similar to Gneezy and List 2006). The recruitment poster offered 15 per hour. Three treatments: Neutral: as promised, subjects were paid 15 Kind: subjects were paid 20. Unkind: subjects were paid 10.

35 Kube et al. (2006): Results Negative reciprocity is stronger. Kube et al. (2006)

36 Kube et al. (2006): Results Negative reciprocity is stronger. Kube et al. (2006)

37 Kube et al. (2008): The Currency of Reciprocity Subjects were recruited to digitize library holdings (a task similar to Gneezy and List 2006). The recruitment poster offered 12 per hour. Four treatments: Base: as promised, subjects were paid 12 Money: subjects received additional 7. Bottle: subjects were given small thermos bottle worth 7. Price tag: similar to Bottle, however the price of a thermos bottle was explicitly mentioned.

38 Kube et al. (2008): Results Both Bottle and PriceTag treatments yield significantly higher effort, while treatment Money has insignificant impact on workers productivity. Kube et al. (2008)

39 Kube et al. (2008): Results Both Bottle and PriceTag treatments yield significantly higher effort, while treatment Money has insignificant impact on workers productivity. Kube et al. (2008)

40 Trust Trust Game (TG) Two players. Player 1 (the first mover) decides how much of $10 to send to player 2 (the second mover) The amount sent is tripled. The player 2 receives tripled money and (now acting as a dictator) decides how much to send back to player 1.

41 Berg et al. (1994): Evidence Overwhelming majority of the first movers send positive amount and the second movers tend to reciprocate trust, although not completely. Berg et al. (1995)

42 Berg et al. (1994): Social history treatment The experiment was repeated with additional set of subjects. They were provided with the results of no history treatment.

43 Berg et al. (1994): Social history treatment results The amount send was not statistically different in the history and the no history treatments, however average payback was significantly higher in the history treatment. Berg et al. (1995)

44 Falk and Kosfeld (2004): Distrust - The Hidden Cost of Control Standard principal-agent game: = ; = ; [0,120]; Principal can give agent complete freedom over latter s choice of the effort or set the minimum effort level at 10:

45 Falk and Kosfeld (2004): Results Agents choose significantly higher effort levels if the principal decides not to control. Falk and Kosfeld (2004)

46 Falk and Kosfeld (2004): Results Agents choose significantly higher effort levels if the principal decides not to control. Falk and Kosfeld (2004)

47 Falk and Kosfeld (2004): Results Majority of principals choose not to restrict agents choice set. Those who decide to control, are more pessimistic about agents performance. Falk and Kosfeld (2004)