Problem 8: Cooperation

Question 1

ultimatum game

Answer 1

1. Two participants bargain over an amount of money
2. A Proposer has to offer some proportion of the money to a Responder
3. If the Responder accepts the offer, then she/he gets to keep that sum and the Proposer keeps whatever he/she has left
4. If the Responder rejects the offer, then neither party gets to keep any money

Question 2

game theory

Answer 2

a formal theory that tells you how to choose optimally, given your preferences, some constraints, and the dependency of your outcomes on others’ decisions

Question 3

game

Answer 3

PAPI structure
Players –> who is involved? what do they care for?
Actions –> who can do what and when
Payoffs –> for all outcomes: who gets how much?
Information –> what do players know when they act?

Question 4

assumptions of game theory

Answer 4

–> both participants should act in a way that maximizes their self-interests

–> the Responder should accept any amount that is offered

–> the Proposer should offer the smallest amount possible

–> players in a game share common knowledge

–> common knowledge of rationality

–> in reality people do not behave in accordance with these predictions

Question 5

prisoner’s dilemma

Answer 5

cooperation –> not implicating your partner
defection –> implicating your partner

–> for both players, defecting would be the dominant strategy because it is the safest

Question 6

Nash equilibrium

Answer 6

joint defection is regarded as the dominant strategy because there is only one equilibrium point

Question 7

public goods game

Answer 7

1. Individuals are provided with an endowment and then given the option how much to contribute
2. Whatever is in the pool of resources is increased by some proportion
3. The resources are divided up among all participants

–>collective rational action: contribute to the pool
–> individual rational action: withhold a contribution

Question 8

Downing Strategy

Answer 8

1. Assuming that the other party would be unresponsive to its own cooperation or defection
2. Amending this assumption on the basis of how the other party actually did respond to cooperation and defection

Question 9

Tit-for-tat (TFT)

Answer 9

1. Cooperating
2. Every subsequent action copies the action of the other player

–> punishes defection but rewards cooperation

Question 10

Fear

Answer 10

1. fear of being taken for a sucker
2. fear of being punished for acting in a self-interested manner

Question 11

Greed

Answer 11

the flip side of fear –> people often behave in a greedy fashion once the fear is removed

Question 12

Punishment

Answer 12

1. Punishment is altruistic because it benefits the group at a cost to the punisher
2. Punishment is motivated by anger
3. Punishment is motivated by revenge

–> substantially increase the level of contributions when being punished for not cooperating

Question 13

altruistic punishment

Answer 13

by feeling motivated to punish those who weren’t cooperating, people were able to ensure that group members didn’t free-ride, which allowed humans to develop norms for cooperation, and for large societies to flourish

Question 14

antisocial punishment

Answer 14

people sometimes paid their own money to punish another player, even if that player was cooperating
–> the motivations for this antisocial punishment seemed to be largely a function of revenge, in which people would punish a player who had punished them on a previous round

Question 15

social value orientation

Answer 15

Prosocial people wish to maximize joint gain and equality in outcomes
–> prosocial individuals exhibit a more secure attachment style

Individualists are interested only in maximizing their own gains
–> more selfish students opt to study economics
–> less cooperation among economic majors

Competitors wish to maximize relative gain (meaning the difference between one’s own and the other’s outcome)

Question 16

Trust

Answer 16

= the willingness to accept vulnerability based upon positive expectations about another’s behavior

–> cooperation might be increased where trust in one’s partner is increased
–> the moral character/reputation of a person is related to how trustworthy this person is perceived

Question 17

Generosity - TFT + 1

Answer 17

noise –> an erroneous response
–> causes two interacting TFT players to enter into a cycle of never-ending retaliation

TFT + 1 is a strategy that behaves slightly more cooperatively than the interaction partner did on the previous trial

Question 18

Communication

Answer 18

–> communication can overcome the problem of noise

Communication increases cooperation:
–> communication promotes group solidarity
–> communication allows group members to express their commitment to mutually cooperate

–> misleading communications could potentially decrease cooperation if people do not live up to their promises

Question 19

Principle of need

Answer 19

resources are directed toward those who need them the most

application in industrialized societies –> universal health insurance, welfare system, charity

Question 20

Principle of equality

Answer 20

resources should be shared equally among the members of a group

Question 21

Principle of equity

Answer 21

resources are distributed based on an individual’s contributions

–> dominant form of resource distribution in the West

Question 22

meritocracy

Answer 22

= a social system that rewards individuals on the basis of the equity principle

advantage: motivation to work hard
disadvantage: breeds competition among workers, thereby potentially disrupting harmonious relations among them

Question 23

seniority system

Answer 23

= time with the company or age is being rewarded

advantage: there is no competition among individuals for compensation
disadvantage: individuals might not be motivated to work as hard

Question 24

Variables the predict which societies make larger (more fair) offers

Answer 24

1. Market integration
   –> people learn norms to play fair as a result of cultural experiences with markets
   –> more experience = greater desire for fairness
2. Religion
   –> larger societies tend to have religions that offer moral guidance
   –> people playing an anonymous game more fairly, perhaps because of a belief that their behavior is not anonymous in the eyes of God

Question 25

Social Neuroeconmics

Answer 25

= tries to understand the brain processes that govern regular deviations from purely self-interested behavior

= combines the tools of social cognitive neuroscience with well-structured tasks taken from economic theory

Question 26

Why does prosocial behavior occur?

Answer 26

1. repeated interactions in which immediate prosocial behavior earns future benefits
2. Pro-social behavior reflects robust social preferences for treating others generously or reciprocally

Question 27

Theory of social preferences

Answer 27

subjects prefer to punish unfair behavior because leaving an unfair act unpunished is associated with higher disutility than bearing the cost of punishing an unfair act

–> activation of the reward circuitry

–> based on decision utility = a numerical measure that is thought to underlie observed behavior –> measures its usefulness

Question 28

Theory of reciprocal fairness/reciprocity and inequity aversion

Answer 28

subjects prefer the mutual cooperation outcome over the unilateral defection outcome, although unilateral defection leads to a higher economic payoff

–> activation in the ventral striatum when subjects experience mutual cooperation

Question 29

Ventromedial Prefrontal Cortex (VMPFC)

Answer 29

–> involved in the integration of separate benefits and costs in the pursuit of behavioral goals
–> emotional processing and moral judgment
–> processing of decisions involving social preferences

Question 30

Dorsolateral Prefrontal Cortex (DLPFC)

Answer 30

–> processing of decisions involving social preferences
–> activation in the contrast between fair and unfair offers
–> cognitive control of impulses
–> right DLPFC: involved in controlling the impulse that pushes subjects towards accepting unfair offers by controlling economic self-interest

Question 31

Social emotions

Answer 31

emotions = psychological states comprised of multiple interrelated processes such as cognitive appraisals, physiological responses, behavioral action tendencies, and the phenomenological experience of feelings

–> social emotions are central in ensuring the success of collaborative social exchanges

Question 32

Appraisal Theory

Answer 32

= defines emotions as adaptive responses that are elicited based on how an agent evaluates their situation

Appraisals are typically directly related to the motivational goals of the agent and occur in response to both external stimuli and also to internally generated thoughts –> cognitive antecedents to the experience of emotion

Question 33

Guilt aversion theory

Answer 33

guilt = arises from the appraisal that one has failed to live up to the expectations of a relationship partner and motivates reparative action tendencies

–> how guilt can encourage trust in cooperation and in social interactions
–> ‘simple guilt’ - a player feels guilty to the extent his actions cause a co-player to receive less than he expected
–> players have competing motivations to maximize material payoffs and to minimize the aversive psychological payoffs from disappointing a relationship partner
–> guilt aversion - participants were more likely to reciprocate when they believed that their partner had higher expectations of them cooperating

Question 34

Anger

Answer 34

= arises from the appraisal that progress toward a goal is blocked, or a social/moral norm has been transgressed and motivates punishment and revenge action tendencies

–> anger can be connected with frustration - the difference between the best outcome player A can still receive in the game and the material payoff player A had initially expected
–> ‘simple anger’ - even frustrations not attributed to player B can result in player A choosing actions that harm player B

Question 35

Norms

Answer 35

–> arise because humans use evolved learning mechanisms to calibrate their behavior, motivations, and beliefs to variable circumstances

–> facilitate trust, fairness, and cooperation

Question 36

Market norms

Answer 36

–> sustain mutually beneficial exchanges in contexts where established social relationships were not enough

–> the efficiency of market exchange involving infrequent or anonymous interactions improves with an increasingly shared set of motivations and expectations related to trust, fairness, and cooperation

–> increases long-term rewards

Question 37

Religion

Answer 37

–> religious systems spur prosocial behavior in broader communities

–> supernatural incentives and recurrent rituals intensify group solidarity