Bettina Rockenbach

Egalitarianism in young children

Human social interaction is strongly shaped by other-regarding preferences, that is, a concern for the welfare of others. These preferences are important for a unique aspect of human sociality—large scale cooperation with genetic strangers—but little is known about their developmental roots. Here we show that young children’s other-regarding preferences assume a particular form, inequality aversion that develops strongly between the ages of 3 and 8. At age 3–4, the overwhelming majority of children behave selfishly, whereas most children at age 7–8 prefer resource allocations that remove advantageous or disadvantageous inequality. Moreover, inequality aversion is strongly shaped by parochialism, a preference for favouring the members of one’s own social group. These results indicate that human egalitarianism and parochialism have deep developmental roots, and the simultaneous emergence of altruistic sharing and parochialism during childhood is intriguing in view of recent evolutionary theories which predict that the same evolutionary process jointly drives both human altruism and parochialism.

The efficient interaction of indirect reciprocity and costly punishment

Human cooperation in social dilemmas challenges researchers from various disciplines. Here we combine advances in experimental economics and evolutionary biology that separately have shown that costly punishment and reputation formation, respectively, induce cooperation in social dilemmas. The mechanisms of punishment and reputation, however, substantially differ in their means for ‘disciplining’ non-cooperators. Direct punishment incurs salient costs for both the punisher and the punished, whereas reputation mechanisms discipline by withholding action, immediately saving costs for the ‘punisher’. Consequently, costly punishment may become extinct in environments in which effective reputation building—for example, through indirect reciprocity—provides a cheaper and powerful way to sustain cooperation. Unexpectedly, as we show here, punishment is maintained when a combination with reputation building is available, however, at a low level. Costly punishment acts are markedly reduced although not simply substituted by appreciating reputation. Indeed, the remaining punishment acts are concentrated on free-riders, who are most severely punished in the combination. When given a choice, subjects even prefer a combination of reputation building with costly punishment. The interaction between punishment and reputation building boosts cooperative efficiency. Because punishment and reputation building are omnipresent interacting forces in human societies, costly punishing should appear less destructive without losing its deterring force.

Human Altruism: Economic, Neural, and Evolutionary Perspectives

Human cooperation represents a spectacular outlier in the animal world. Unlike other creatures, humans frequently cooperate with genetically unrelated strangers, often in large groups, with people they will never meet again, and when reputation gains are small or absent. Experimental evidence and evolutionary models suggest that strong reciprocity, the behavioral propensity for altruistic punishment and altruistic rewarding, is of key importance for human cooperation. Here, we review both evidence documenting altruistic punishment and altruistic cooperation and recent brain imaging studies that combine the powerful tools of behavioral game theory with neuroimaging techniques. These studies show that mutual cooperation and the punishment of defectors activate reward related neural circuits, suggesting that evolution has endowed humans with proximate mechanisms that render altruistic behavior psychologically rewarding.

The behavioral relevance of mental accounting for the pricing of financial options

Abstract The paper reports an experiment on the pricing of financial options. Arbitrage-free option pricing is tested against three hypotheses based on mental accounting. The data show that, even with considerable experience, unexploited arbitrage opportunities persist. Subjects do not seem to make the connections between the different investment possibilities, as essential for arbitrage-free pricing (AFP). Instead, they act as if they associate the risky assets to the same mental account, while the bond is treated separately. This corresponds to the construction of a two-layer portfolio (of a risky and a safe layer) in the behavioral portfolio theory of Shefrin and Statman [J. Fin. Quant. Anal. 35 (2000) 127].

An Experimental Test of Design Alternatives for the British 3G / UMTS Auction

In spring 2000, the British government auctioned off licences for Third Generation mobile telecommunications services. In the preparation of the auction, two designs involving each a hybrid of an English and a sealed-bid auction were suggested by the government: a discriminatory and a uniform price variant. We report an experiment on these two designs, and also compare the results to those with a pure English auction. Both hybrids are similar in efficiency, revenue differences disappear as bidders get experienced. Compared to the discriminatory format, the pure English auction gives new entrants better chances.

To qualify as a social partner, humans hide severe punishment, although their observed cooperativeness is decisive

Conflicts of interest between the community and its members are at the core of human social dilemmas. If observed selfishness has future costs, individuals may hide selfish acts but display altruistic ones, and peers aim at identifying the most selfish persons to avoid them as future social partners. An interaction involving hiding and seeking information may be inevitable. We staged an experimental social-dilemma game in which actors could pay to conceal information about their contribution, giving, and punishing decisions from an observer who selects her future social partners from the actors. The observer could pay to conceal her observation of the actors. We found sophisticated dynamic strategies on either side. Actors hide their severe punishment and low contributions but display high contributions. Observers select high contributors as social partners; remarkably, punishment behavior seems irrelevant for qualifying as a social partner. That actors nonetheless pay to conceal their severe punishment adds a further puzzle to the role of punishment in human social behavior. Competition between hiding and seeking information about social behavior may be even more relevant and elaborate in the real world but usually is hidden from our eyes.

Direct and indirect punishment among strangers in the field

Significance Why do humans cooperate in one-time interactions with strangers? The most prominent explanations for this long-standing puzzle rely on punishment of noncooperators, but differ in the form punishment takes. In models of direct punishment, noncooperators are punished directly at personal cost, whereas indirect reciprocity assumes that punishment is indirect by withholding rewards. To resolve the persistent debate on which model better explains cooperation, we conduct the first field experiment, to our knowledge, on direct and indirect punishment among strangers in real-life interactions. We show that many people punish noncooperators directly but prefer punishing indirectly by withholding help when possible. The occurrence of direct and indirect punishment in the field shows that both are key to understanding the evolution of human cooperation. Many interactions in modern human societies are among strangers. Explaining cooperation in such interactions is challenging. The two most prominent explanations critically depend on individuals’ willingness to punish defectors: In models of direct punishment, individuals punish antisocial behavior at a personal cost, whereas in models of indirect reciprocity, they punish indirectly by withholding rewards. We investigate these competing explanations in a field experiment with real-life interactions among strangers. We find clear evidence of both direct and indirect punishment. Direct punishment is not rewarded by strangers and, in line with models of indirect reciprocity, is crowded out by indirect punishment opportunities. The existence of direct and indirect punishment in daily life indicates the importance of both means for understanding the evolution of cooperation.

Collusion under Yardstick Competition: An Experimental Study

The effectiveness of relative performance evaluation schemes, such as yardstick competition, can be undermined by collusion. The degree to which the regulated agents manage to collude will be affected by the particulars of the scheme. We hypothesize that in a repeated game setting schemes will be more prone to collusion the smaller are the rents to the agents in case they behave non-cooperatively. We illustrate the relevance of this hypothesis by means of an economic experiment in which we compare the efficiency of two performance evaluation schemes.

The Inter-Group Comparison – Intra-Group Cooperation Hypothesis: Comparisons between Groups Increase Efficiency in Public Goods Provision

Identifying methods to increase cooperation and efficiency in public goods provision is of vital interest for human societies. The methods that have been proposed often incur costs that (more than) destroy the efficiency gains through increased cooperation. It has for example been shown that inter-group conflict increases intra-group cooperation, however at the cost of collective efficiency. We propose a new method that makes use of the positive effects associated with inter-group competition but avoids the detrimental (cost) effects of a structural conflict. We show that the mere comparison to another structurally independent group increases both the level of intra-group cooperation and overall efficiency. The advantage of this new method is that it directly transfers the benefits from increased cooperation into increased efficiency. In repeated public goods provision we experimentally manipulated the participants’ level of contribution feedback (intra-group only vs. both intra- and inter-group) as well as the provision environment (smaller groups with higher individual benefits from cooperation vs. larger groups with lower individual benefits from cooperation). Irrespective of the provision environment groups with an inter-group comparison opportunity exhibited a significantly stronger cooperation than groups without this opportunity. Participants conditionally cooperated within their group and additionally acted to advance their group to not fall behind the other group. The individual efforts to advance the own group cushion the downward trend in the above average contributors and thus render contributions on a higher level. We discuss areas of practical application.

We are Not Alone: The Impact of Externalities on Public Good Provision

Public good provision is often local and also affects bystanders. Is provision harder if contributions harm bystanders, and is provision easier if outsiders gain a windfall profit? In an experiment we observe that both positive and negative externalities reduce provision levels whenever actors risk falling back behind bystanders. The mere presence of unaffected bystanders already dampens contributions. This behavior seems to result from the interplay of two motives: the desire to realize opportunities for joint gains, and concerns for comparative performance. Individual payoff comparisons to the other actors as well as to individual bystanders drive contributions down.