How the Emotions Enforce the Cooperative Behavior in Social Dilemma Games

Speaker林 家 仰

Before start

The main contents in this speech are discussing Prof Ernesto Reubenrsquos paper and using the materials in his courses

httpereubengooglepagescomhome

Outline

Whatrsquos experimental economics A very brief history Neuroeconomics Public goods Punishment Emotions

Whatrsquos experimental economics

A discipline in which data are collected in a controlled environment

A Brief History

Market experiments Decentralized markets

Chamberlin (1948) induced demand and cost structure Double auction

Vernon Smith (1962 1964)Game experiments Prisonerslsquodilemma 1950rsquos

Originally by psychologists and sociologists Oligopoly games

Reinhard Selten(1959)Individual choice experiments Choice under uncertainty

Savage (1954) Allais paradox (1953)

Why experimental method

Advantages of the experiments Control

Institutions (eg voting rules communication etc) Not always complete control (eg social norms)

Incentives (payoffs) Not always complete control (eg altruism)

Measure confounding variables (eg beliefs) Randomization (avoids some self-selection problems)

Replication Check for robustness experimenter effects etc Gives an incentive to do it right Make available data instructions program and procedures

Importance

Economics is becoming an experimental science like physics and biology1048707

Like theory running experiments is an established method to explain andor describe economic activity

Neuroeconomics

See lecture 1 on Prof Ernesto Reubenrsquos web site httpereubengooglepagescomexpteach

Public Goods

Real-world problems of cooperation Cooperative hunting and warfare Teamwork in firms Charities and gift-giving Environmental protection Economic public goods

Paying taxes Fishing Security

Political collective action Voting Lobbying Revolutions

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Before start

The main contents in this speech are discussing Prof Ernesto Reubenrsquos paper and using the materials in his courses

httpereubengooglepagescomhome

Outline

Whatrsquos experimental economics A very brief history Neuroeconomics Public goods Punishment Emotions

Whatrsquos experimental economics

A discipline in which data are collected in a controlled environment

A Brief History

Market experiments Decentralized markets

Chamberlin (1948) induced demand and cost structure Double auction

Vernon Smith (1962 1964)Game experiments Prisonerslsquodilemma 1950rsquos

Originally by psychologists and sociologists Oligopoly games

Reinhard Selten(1959)Individual choice experiments Choice under uncertainty

Savage (1954) Allais paradox (1953)

Why experimental method

Advantages of the experiments Control

Institutions (eg voting rules communication etc) Not always complete control (eg social norms)

Incentives (payoffs) Not always complete control (eg altruism)

Measure confounding variables (eg beliefs) Randomization (avoids some self-selection problems)

Replication Check for robustness experimenter effects etc Gives an incentive to do it right Make available data instructions program and procedures

Importance

Economics is becoming an experimental science like physics and biology1048707

Like theory running experiments is an established method to explain andor describe economic activity

Neuroeconomics

See lecture 1 on Prof Ernesto Reubenrsquos web site httpereubengooglepagescomexpteach

Public Goods

Real-world problems of cooperation Cooperative hunting and warfare Teamwork in firms Charities and gift-giving Environmental protection Economic public goods

Paying taxes Fishing Security

Political collective action Voting Lobbying Revolutions

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Outline

Whatrsquos experimental economics A very brief history Neuroeconomics Public goods Punishment Emotions

Whatrsquos experimental economics

A discipline in which data are collected in a controlled environment

A Brief History

Market experiments Decentralized markets

Chamberlin (1948) induced demand and cost structure Double auction

Vernon Smith (1962 1964)Game experiments Prisonerslsquodilemma 1950rsquos

Originally by psychologists and sociologists Oligopoly games

Reinhard Selten(1959)Individual choice experiments Choice under uncertainty

Savage (1954) Allais paradox (1953)

Why experimental method

Advantages of the experiments Control

Institutions (eg voting rules communication etc) Not always complete control (eg social norms)

Incentives (payoffs) Not always complete control (eg altruism)

Measure confounding variables (eg beliefs) Randomization (avoids some self-selection problems)

Replication Check for robustness experimenter effects etc Gives an incentive to do it right Make available data instructions program and procedures

Importance

Economics is becoming an experimental science like physics and biology1048707

Like theory running experiments is an established method to explain andor describe economic activity

Neuroeconomics

See lecture 1 on Prof Ernesto Reubenrsquos web site httpereubengooglepagescomexpteach

Public Goods

Real-world problems of cooperation Cooperative hunting and warfare Teamwork in firms Charities and gift-giving Environmental protection Economic public goods

Paying taxes Fishing Security

Political collective action Voting Lobbying Revolutions

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Whatrsquos experimental economics

A discipline in which data are collected in a controlled environment

A Brief History

Market experiments Decentralized markets

Chamberlin (1948) induced demand and cost structure Double auction

Vernon Smith (1962 1964)Game experiments Prisonerslsquodilemma 1950rsquos

Originally by psychologists and sociologists Oligopoly games

Reinhard Selten(1959)Individual choice experiments Choice under uncertainty

Savage (1954) Allais paradox (1953)

Why experimental method

Advantages of the experiments Control

Institutions (eg voting rules communication etc) Not always complete control (eg social norms)

Incentives (payoffs) Not always complete control (eg altruism)

Measure confounding variables (eg beliefs) Randomization (avoids some self-selection problems)

Replication Check for robustness experimenter effects etc Gives an incentive to do it right Make available data instructions program and procedures

Importance

Economics is becoming an experimental science like physics and biology1048707

Like theory running experiments is an established method to explain andor describe economic activity

Neuroeconomics

See lecture 1 on Prof Ernesto Reubenrsquos web site httpereubengooglepagescomexpteach

Public Goods

Real-world problems of cooperation Cooperative hunting and warfare Teamwork in firms Charities and gift-giving Environmental protection Economic public goods

Paying taxes Fishing Security

Political collective action Voting Lobbying Revolutions

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

A Brief History

Market experiments Decentralized markets

Chamberlin (1948) induced demand and cost structure Double auction

Vernon Smith (1962 1964)Game experiments Prisonerslsquodilemma 1950rsquos

Originally by psychologists and sociologists Oligopoly games

Reinhard Selten(1959)Individual choice experiments Choice under uncertainty

Savage (1954) Allais paradox (1953)

Why experimental method

Advantages of the experiments Control

Institutions (eg voting rules communication etc) Not always complete control (eg social norms)

Incentives (payoffs) Not always complete control (eg altruism)

Measure confounding variables (eg beliefs) Randomization (avoids some self-selection problems)

Replication Check for robustness experimenter effects etc Gives an incentive to do it right Make available data instructions program and procedures

Importance

Economics is becoming an experimental science like physics and biology1048707

Like theory running experiments is an established method to explain andor describe economic activity

Neuroeconomics

See lecture 1 on Prof Ernesto Reubenrsquos web site httpereubengooglepagescomexpteach

Public Goods

Real-world problems of cooperation Cooperative hunting and warfare Teamwork in firms Charities and gift-giving Environmental protection Economic public goods

Paying taxes Fishing Security

Political collective action Voting Lobbying Revolutions

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Why experimental method

Advantages of the experiments Control

Institutions (eg voting rules communication etc) Not always complete control (eg social norms)

Incentives (payoffs) Not always complete control (eg altruism)

Measure confounding variables (eg beliefs) Randomization (avoids some self-selection problems)

Replication Check for robustness experimenter effects etc Gives an incentive to do it right Make available data instructions program and procedures

Importance

Economics is becoming an experimental science like physics and biology1048707

Like theory running experiments is an established method to explain andor describe economic activity

Neuroeconomics

See lecture 1 on Prof Ernesto Reubenrsquos web site httpereubengooglepagescomexpteach

Public Goods

Real-world problems of cooperation Cooperative hunting and warfare Teamwork in firms Charities and gift-giving Environmental protection Economic public goods

Paying taxes Fishing Security

Political collective action Voting Lobbying Revolutions

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Importance

Economics is becoming an experimental science like physics and biology1048707

Like theory running experiments is an established method to explain andor describe economic activity

Neuroeconomics

See lecture 1 on Prof Ernesto Reubenrsquos web site httpereubengooglepagescomexpteach

Public Goods

Real-world problems of cooperation Cooperative hunting and warfare Teamwork in firms Charities and gift-giving Environmental protection Economic public goods

Paying taxes Fishing Security

Political collective action Voting Lobbying Revolutions

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Neuroeconomics

See lecture 1 on Prof Ernesto Reubenrsquos web site httpereubengooglepagescomexpteach

Public Goods

Real-world problems of cooperation Cooperative hunting and warfare Teamwork in firms Charities and gift-giving Environmental protection Economic public goods

Paying taxes Fishing Security

Political collective action Voting Lobbying Revolutions

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Public Goods

Real-world problems of cooperation Cooperative hunting and warfare Teamwork in firms Charities and gift-giving Environmental protection Economic public goods

Paying taxes Fishing Security

Political collective action Voting Lobbying Revolutions

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

The voluntary contributions mechanism (VCM) The profit of each subject

endowment ei

Contribute to public account ci

Contributions to the public good benefit each member by αi (marginal per capita return MPCR)

Group of n members

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Reasons for cooperation

By mistake Do not understand that ci= 0 is dominant Do understand dominance but make systematic errors

Social preferences Altruism warm glow efficiency-seeking motives Conditional cooperation reciprocity

Strategic cooperation Strategies such as Tit-for-Tat can support cooperation among self

ish players mostly infinitely repeated games but see also Kreps et al (1982)

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

By mistake

Cooperating by Mistake Brandts et al 2004

Design VCM n= 4 e= 9 repeated for 10 periods 72 subjects within subjects On every period the MPCR is randomly drawn from 10

values MPCR le01875 efficient 1048707ci= 0 dominant strategy 1048707ci= 0 03125 leMPCR le09375 efficient 1048707ci= 9 dominant strategy

1048707ci= 0 MPCR ge10625efficient 1048707ci= 9 dominant strategy 1048707ci= 9

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

By mistake

Result

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Conditional Cooperation

Conditional or unconditional cooperation Fischbacher amp Gaumlcheter 2006

Design 140 subjects within subjects VCM n= 4 e= 20 MPCR = 04 2 stages strategy method and normal Decisions 1 unconditional contribution decision Decision 2 use strategy method to elicit contribution schedule with respect to a

verage contribution of decision 1 Pick randomly three decision 1rsquos and one decision 2

Predictions Altruism or lsquowarm glowrsquo contribution is positive but independent of others con

tribution Reciprocity contribution increases with the average contribution of others Selfish always contribute zero

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Conditional Cooperation

Results1048707 Little unconditional

cooperation1048707 Heterogeneity in typ

es 55 conditional co

operators 23 selfish 12 lsquohump-shapersquo

contributors 10 other

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Strategic cooperation

Is there strategic cooperation Keseramp van Winden2000

Compare partners vs strangers If partners cooperate more rarr supports strategic cooperation

Design1048707 VCM

n= 4 e= 10 25 periods MPCR = 05

160 subjects between subjects

Results Strong effect of the partnerrsquos tre

atment

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Explaining the decline in cooperation Croson 1996 Why does cooperation decline with time

Strategic cooperation Learning to play the dominant strategy

Design surprise restart VCM n= 4 e= 25 MPCR = 05 Repeated 10 + 10 periods 24 subjects

Results Clear evidence of restart specially for partners

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Punishment

The effectiveness of punishment Nikiforakis and Normann 2006

Results1048707 Punishment sustains

cooperation with a damagecost ratio greater than 211048707

Punishment increases welfare with a damagecost ratio greater than 31

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

To punish or not to punish Sanfreyet al 2003

Results Higher activation in anterior insulafor unfair hu

man offers Activation is higher with degree of unfairness

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Results Higher activation in anterior insulafor

unfair human offers Activation is higher with degree of unfair

ness Activation is highest with rejection

Higher activation in right dorsolateral prefrontal cortex Not sensitive to rejection

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Emotions

Prosocial emotions Hopfensitz and Reuben 2006

For punishment to be effective Punished subjects should switch to coop

eration Punished subjects should not punish bac

k

Design Trust game with lsquoinfinitersquo rounds of puni

shment (costs 1 to reduce 4) 2 periods perfect strangers emotions are measured before making de

cisions

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Measurement of Emotions

Is self reports a good idea experimental economists

self reports is sometimes regarded with suspicion (Smith and Walker 1993)

self reports will often overstate the true amount that individuals are will-ing to pay (Murphy et al 2005)

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Measurement of Emotions

Social psychology emotions are internal difficult to observe states self re

ports of emotions are an often used technique (Robinson and Clore 2002)

self reports of anger have been related to skin conductance levels for emotional reactions in the powe

r to take game (Ben-Shakhar et al 2007 self reported are indeed reliable can be deduced from a

recent neuroimaging study (Takahashi et al 2004)

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Measurement of Emotions

measured emotions included anger gratitude guilt happiness irritation shame and surprise

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Results first movers cooperate more often and second movers

return more in the presence of punishment

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Results 2nd movers cooperate after being punished only if they

feel guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt

Results Considerable retaliation after receiving punishment

40 of second movers punish back if punished 2nd movers retaliate because

They are angry and feel no guilt