Luca Zarri

Legitimate punishment, feedback, and the enforcement of cooperation

In dealing with peer punishment as a cooperation enforcement device, laboratory studies have typically concentrated on discretionary sanctioning, allowing players to castigate each other arbitrarily. By contrast, in real life punishments are often meted out only insofar as punishers are entitled to punish and punishees deserve to be punished. We provide an experimental test for this ‘legitimate punishment’ institution and show that it yields substantial benefits to cooperation and efficiency gains, compared to a classic, ‘vigilante justice’ institution. We also focus on the role of feedback and we interestingly find that removing the information over high contributorsʼ choices is sufficient to generate a dramatic decline in cooperation rates and earnings. This interaction result implies that providing feedback over virtuous behavior in the group is necessary to make a legitimate punishment scheme effective.

Social Status and Personality Traits

We provide direct evidence on the relationship between social status and personality traits. Using survey data from the 2006–2012 waves of the US Health and Retirement Study, we show that self-perceived social status is associated with all the “Big Five” personality traits, after controlling for observable characteristics that arguably reflect one’s actual status. We also construct an objective status measure that in turn is associated with personality traits. Objectively measured status is positively but not highly correlated with its subjective counterpart. When incorporated in a regression specification, it still leaves room for significant correlations between personality traits and status perception: traits such as openness, conscientiousness and extraversion predict a higher self-positioning on the social ladder, while agreeableness and neuroticism predict a lower one.

Fair play doesn't matter: MEP modulation as a neurophysiological signature of status quo bias in economic interactions

Transcranial magnetic stimulation (TMS) studies show that watching others movements enhances motor evoked potential (MEPs) amplitude of the muscles involved in the observed action (motor facilitation, MF). MF has been attributed to a mirror neuron system mediated mechanism, causing an excitability increment of primary motor cortex. It is still unclear whether the meaning an action assumes when performed in an interpersonal exchange context could affect MF. This study aims at exploring this issue by measuring MF induced by the observation of the same action coupled with opposite reward values (gain vs loss) in an economic game. Moreover, the interaction frame was manipulated by showing the same actions within different economic games, the Dictator Game (DG) and the Theft Game (TG). Both games involved two players: a Dictator/Thief and a receiver. Experimental participants played the game always as receivers whereas the Dictator/Thief roles were played by our confederates. In each game Dictator/Thiefs choices were expressed by showing a grasping action of one of two cylinders, previously associated with fair/unfair choices. In the DG the dictator decides whether to share (gain condition) or not (no-gain condition) a sum of money with the receiver, while in TGs the thief decides whether to steal (loss condition) or not to steal (no-loss condition) it from the participants. While the experimental subjects watched the videos showing these movements, a single TMS pulse was delivered to their motor hand area and a MEP was recorded from the right FDI muscle. Results show that, in the DG, MF was enhanced by the status quo modification, i.e. MEP amplitude increased when the dictator decided to change the receivers status quo and share his/her money, and this was true when the status quo was more salient. The same was true for the TG, where the reverse happened: MF was higher for trials in which the thief decided to steal the participants money, thus changing the status quo, in the block in which the status quo maintenance occurred more often. Data support the hypothesis that the economic meaning of the observed actions differently modulates MEP amplitude, pointing at an influence on MF exerted by a peculiar interaction between economic outcomes and variation of the subjects initial status quo.

Happiness, Morality and Game Theory

This book is a welcome consolidation and extension of the recent expanding debates on happiness and economics. Happiness and economics, as a new field for research, is now of pivotal interest particularly to welfare economists and psychologists. This Handbook provides an unprecedented forum for discussion of the economic issues relating to happiness. It reviews the more recent literature and offers the interested reader an insight into the vast scope of the field in terms of the theory, its applications and also experimental design. The Handbook also gives substantial indications as to the future direction of research in the field, with particular regard to policy applications and developing an economics of interpersonal relations which includes reciprocity and social interaction theory.

Punish and Perish

The evolution of large-scale cooperation among genetic strangers is a fundamental unanswered question in the social sciences. Behavioral economics has persuasively shown that so called ‘strong reciprocity’ plays a key role in accounting for the endogenous enforcement of cooperation. Insofar as strongly reciprocal players are willing to costly sanction defectors, cooperation flourishes. However, experimental evidence unambiguously indicates that not only defection and strong reciprocity, but also unconditional cooperation is a quantitatively important behavioral attitude. By referring to a prisoner’s dilemma framework where punishment (‘stick’) and rewarding (‘carrot’) options are available, here we show analytically that the presence of cooperators who don’t punish in the population makes altruistic punishment evolutionarily weak. We show that cooperation breaks down and strong reciprocity is maladaptive if costly punishment means ‘punishing defectors’ and, even more so, if it is coupled with costly rewarding of cooperators. In contrast, punishers don’t perish if cooperators, far from being rewarded, are sanctioned. These results, based on an extended notion of strong reciprocity, challenge evolutionary explanations of cooperation that overlook the ‘dark side’ of altruistic behavior.

Goal Achievement Failure Drives Corticospinal Modulation in Promotion and Prevention Contexts

When making decisions, people are typically differently sensitive to gains and losses according to the motivational context in which the choice is performed. As hypothesized by Regulatory Focus Theory (RFT), indeed, goals are supposed to change in relation to the set of possible outcomes. In particular, in a promotion context, the goal is achieving the maximal gain, whereas in a prevention context it turns into avoiding the greatest loss. We explored the neurophysiological counterpart of this phenomenon, by applying Transcranial Magnetic Stimulation (TMS) and recording the motor evoked potentials (MEPs) in participants taking part in an economic game, in which they observed actions conveying different goal attainment levels, framed in different motivational contexts. More than the actual value of the economic exchange involved in the game, what affected motor cortex excitability was the goal attainment failure, corresponding to not achieving the maximal payoff in a promotion context and not avoiding the greatest snatch in a prevention context. Therefore, the results provide support for the key predictions of RFT, identifying a neural signature for the goal attainment failure.

Can Risk‐Averse Households Make Risky Investments? The Role of Trust in Others

Using the 2006 wave of the Survey on Health, Ageing and Retirement in Europe (SHARE), this paper sheds light on the role jointly played by individuals’ financial risk tolerance and their level of trust in others (generalized trust) in affecting their risky assets investments. We document that large variation in risk tolerance and trust exists across European countries and households and we show that risky assets investments are more frequent and larger in households featuring either risk tolerance or (to a smaller extent) a combination of risk aversion and trust. Trust thus acts as a substitute (albeit an imperfect one) for risk tolerance. Our findings have implications for our understanding of heterogeneity in household financial decisions as well as of the role that trust can play as a lubricant of the economic system.

The Social Status-Enhancing Power of Social Ties

This paper shows that social variables capturing individuals’ sociability as well as strength of their social ties play an important role in affecting where individuals locate themselves in the social ladder, also when their objective location within society is taken into account. Using data from the US Health and Retirement Study (HRS) covering the period 2006-2012, we assess individuals’ social ties and sociability through the number and quality of their friendships as well as a set of variables capturing their attitude towards others (loneliness, cynical hostility, social cohesion, discrimination and reciprocity). We find subjective social status to correlate positively with reciprocity and negatively with discrimination. Next, individuals that are more satisfied with their life seem disconnected from objective elements when subjectively evaluating their social status.

Reciprocita' e free riding: un’analisi evolutiva

In the lab, in both one-shot interactions and first rounds of repeated games, subjects turn out to cooperate significantly more than the well-known, classical Homo Oeconomicus model predicts. Behavioural economics has persuasively shown that this ‘irrational’ rate of cooperation is compatible with the presence of reciprocity on the part of some of the individuals involved in the group. At the same time, a sizeable proportion of players act selfishly, failing to cooperate from the outset. However, so far we lack theoretical models accounting for such stable coexistence of free riders and reciprocators. Our work, by means of an evolutionary analysis of the Prisoner’s Dilemma (PD) game, provides an endogenisation of such motivational heterogeneity and, under certain conditions, sheds light on the evolutionary stability of two-type populations consisting of positive proportions of egoists and reciprocators.