Do the right thing: But only if others do so

1. Do the right thing:But only if others do so Cristina Bicchieri & Erte Xiao University of Pennsylvania

2. Motivation • Social norms are important to individual decision-making. • What mechanism underlies this effect? • Two components: expectations and conditional preferences • Empirical expectations • Normative expectations • Cialdini, et. al., 1990 predicts that when empirical and normative expectations are in conflict, normative expectations trump empirical ones.

3. Motivation • Bicchieri (2006): Conditional preference for following a norm based upon: • Empirical expectations (EE): an individual believes that a sufficiently large subset of the population conforms to the norm. • Normative expectations (NE): an individual believes that a sufficiently large subset of the population expects him/her to conform to the norm. • Individuals’ beliefs about what others think or do can affect their behavior - even though it does not affect their monetary payoffs. • How do these two expectations work together to affect behavior?

4. Motivation • Sometimes these two expectations move in different directions. • How is behavior affected when this occurs?

7. Motivation • Sometimes the two expectations move in different directions. Which expectation is more important in directing individual’s behavior? • In societies with high crime rates or corruption, empirical expectations and normative expectations are often inconsistent. • Understanding the role of the two expectations in individuals’ decision making is important for policy making.

8. Goal • Design experiments to investigate how normative and empirical expectations work together to affect behavior, especially when the two expectations are in conflict.

9. Experiment Overview • Dictator game: people often have different opinions about what dictators should offer. • Focus on fairness norms • Manipulate empirical/normative expectations. Gave subjects information about the results of selected previous experimental sessions in (Xiao and Houser, 2006). • Lab experiment controls the salience of each expectation. • Double blind to minimize experimenter effect.

10. Experiment Design • Dictator Game • Treatments: • Fair Beliefs FB • Selfish beliefs (no fair beliefs) SB • Fair Choices FC • Selfish Choices SC • Fair Beliefs but Selfish Choices FB+SC • Selfish Beliefs but Fair Choices SB+FC

11. Experimental Design

12. Experiment Design • Divider: (Dividing option) I choose dividing option_______. That is, Divider gets $_____ Counterpart gets $____

13. Experiment Design • Fair Beliefs (FB) 60% of the dividers who participated in a session of this experiment last year said that dividers should share the amount approximately equally (i.e. choose option C or D (their counterpart gets 40% or more)). Please write down the rule you will choose on the attached card and put it back in the envelope.

14. Experiment Design • Selfish Beliefs (SB) 60% of the dividers who participated in a session of this experiment last year said that dividers should approximately maximize their own earnings (i.e. choose option A or B (their counterpart gets 20% or less)). Please write down the rule you will choose on the attached card and put it back in the envelope.

15. Experiment Design • Fair Choices (FC) 60% of the dividers who participated in a session of this experiment last year shared the amount approximately equally (i.e. chose option C or D (their counterpart got 40% or more)). Please write down the rule you will choose on the attached card and put it back in the envelope.

16. Experiment Design • Selfish Choices (SC) 60% of the dividers who participated in a session of this experiment last year approximately maximized their own earnings (i.e. chose option A or B (their counterpart got 20% or less)). Please write down the rule you will choose on the attached card and put it back in the envelope.

17. Experiment Design • Fair Beliefs but Selfish Choices (FB+SC) (the order of the two sentences in the message is randomized ) 60% of the dividers who participated in a session of this experiment last year said that dividers should share the amount approximately equally (i.e. choose option C or D (their counterpart gets 40% or more)). On the other hand, in a different session of this experiment last year, 60% of the dividers approximately maximized their own earnings (i.e. chose option A or B (their counterpart got 20% or less)). Please write down the rule you will choose on the attached card and put it back in the envelope.

18. Experiment Design • Selfish Beliefs but Fair Choices (SB+FC) (the order of the two sentences in the message is randomized ) 60% of the dividers who participated in a session of this experiment last year said that dividers should approximately maximize their own earnings (i.e. choose option A or B (their counterpart gets 20% or less)). On the other hand, in a different session of this experiment last year, 60% of the dividers shared the amount approximately equally (i.e. chose option C or D (their counterpart got 40% or more)). Please write down the rule you will choose on the attached card and put it back in the envelope.

19. Expectation Questions (Divider) Empirical Expectation of fair choices *b) How many dividers in this room do you think split the money approximately equally (chose either C or D)?EEi EE (fair choice)treatment = ( )treatment

20. Expectation Questions (Divider) Normative Expectation of fair choices d) Do you think that dividers should split the money approximately equally (choose C or D)? *g) How many dividers in this room do you think answered “Yes” to question d)?NEi NE (fair choice)treatment = ( )treatment

21. Expectation Questions (Divider) Dictator's EE about receiver's EE (fair choice) *i) Which option do you think your counterpart believed you WOULD choose?EE (EEreceiver ) EEreceiver =1 if chose C or D EE (EEreceiver )treatment = ( )treatment *j) Which option do you think your counterpart believed you SHOULD choose?EE( Receiver’s NE)

22. Survey question (Receiver) Which option do you think your divider WOULD choose? Why? Which option do you think your divider SHOULD choose? Why? Suppose that 60% of the dividers who participated in a session of this experiment last year said that dividers should share the amount approximately equally (i.e. choose option C or D (their counterpart gets 40% or more)). If your divider knew this, which option do you think your divider WOULD choose? Why?

23. Experimental Procedures • Subjects were recruited at the University of Pennsylvania through the “Experiments @ Penn” web-based recruitment system. • Dictators and receivers were randomly assigned and paired up. • Dictators and receivers were separated and they could not see each other throughout the experiment. • All the decisions are anonymous. Experimenters didn’t know who made what decision. • Each subject received a $5 show up bonus in addition to money earned in the game and the survey ($6 on average). Subjects were in the lab about 30 minutes.

24. Data • We obtained observations on 254 subjects

25. Dictator’s EE & NE • EE (fair choice)treatment = ( )treatment • NE (fair choice)treatment = ( )treatment

26. Observations When only one message is presented: both normative and empirical expectations change in the same directions. In this case, we cannot distinguish relative behavioral importance of EE vs. NE With contradictory information, we can separate effects of EE vs. NE From FB+SC to SB+FC, EE move upward, but NE decline. In FB+SC, NE are much higher than EE Which expectations are consistent with actual decisions?

27. Percentage of fair choices (50% or 40%)

28. Observations Lower percentage of fair offers in SB and SC, much higher in FB and FC Percentage of fair offers in SB+FC is close to FC (45% vs. 52%), and much higher than what we observe in SB treatment (21%) Percentage of fair offers in FB+SC is closer to SC (35% vs. 33%) rather than FB (48%) Empirical expectations seem to play a greater role than normative expectations in choosing to make a fair offer.

29. Empirical expectations and fair choices

30. Normative expectations and fair choices

31. Observations More fair offers in SB+FC than in FB+SC consistentwith increase in empirical expectations of fair offers inconsistent with decrease in normative expectations of fair offers EE about percentage of fair choices not much different from actual percentage of fair offers in each treatment NE are higher than actual fair choices in FB+SC treatment (57% vs. 35%) Are dictators’ decisions also influenced by their expectations of what receivers’ believe? Arethese expectations affected by treatment information?

32. Expectation about Receiver’s EE • EE (EEreceiver )treatment = ( )treatment

33. Observations 80% of dictators expect receivers to believe that dictators should make a fair offer No variation along this dimension among treatments: expectation has not much effect on dictators’ decisions Compare proportion of dictators who believe their receivers expect fair offers (EE) with actual proportion of fair choices. This expectation does not predict dictators’ choices Only empirical expectations about other dictators’ behavior have an effect on fair choices

34. Probit ( fair choice ) on Dictators’ expectations

35. Conclusions Empirical expectations dominate normative expectations in directing individual choices. Normative expectations predict behavior only if they are consistent with empirical expectations. The expectations are about the decisions made by people who cannot affect either a player’s own payoff or the counterpart’s payoffs. Implication: Punishment, to be effective, needs to affect people’s empirical expectations.

36. Further research • Why do empirical expectations dominate normative expectations in determining behavior? • Hypothesis: • people do not punish violations of normative expectations when these are inconsistent with empirical expectations. • When normative expectations are inconsistent with empirical expectations, people do not expect to be punished when they violate the normative expectations. ( “laws are not laid down to punish the majority”)