Parental background and other-regarding preferences in children

Other-regarding preferences are important for establishing and maintaining cooperative outcomes. In this paper, we study how the formation of other-regarding preferences during childhood is related to parental background. Our subjects, aged 4–12 years, are classified into other-regarding types based on simple binary-choice dictator games. The main finding is that the children of parents with low education are less altruistic, more selfish, and more likely to be weakly spiteful. This link is robust to controlling for a rich set of children’s characteristics and class fixed effects. It also stands out against the overall development of preferences, as we find children to become more altruistic, less selfish, and less likely to be weakly spiteful with increasing age. The results, supported by a complementary analysis of World Values Survey data, suggest an important role of socialization in the formation of other-regarding preferences.     

Generous actors,selfish actions: markets with other-regarding preferences

This paper points out that classical competitive outcomes arise in two different market environments even if agents have non-classical preferences. Consumers with separable, other-regarding preferences behave as if they have classical preferences in competitive equilibrium. These outcomes need not be efficient, but under plausible conditions will be efficient following a redistribution of income. In simple double-auction environments competitive outcomes arise under a wide range of assumptions on preferences even without assuming separability. I discuss the importance of the domain of definition of preferences and how the preferences present in the economy influence the performance of the trading institution.

The relation of risk attitudes and other-regarding preferences: A within-subjects analysis

In this paper we provide experimental evidence on the relation of individual risk attitudes and subjects׳ aversion to favorable inequality. In a within-subjects design we expand Blanco et al.׳s (2011) modified dictator game by the risk-elicitation task of Eckel and Grossman (2002). Our data show strong support for a significant negative correlation between risk tolerance and an aversion to favorable inequality. The results are independent of gender, i.e., women and men show a similar correlation in these traits.     

Adam Smith,scientist and evolutionist: modelling other-regarding behavior without social preferences

In this essay, I want to illustrate the power of Sentiments to bring order to contemporary experiments where the traditional game-theoretic models failed decisively to predict human action even under the conditions of anonymity. Sentiments is about sympathy, an undefined primitive human characteristic known and identified through the work it does in enabling the emergence of the human capacity for fellow feeling (in: Smith (ed) The theory of moral sentiments, Oxford, Oxford University Press, p. 10, 1759). Fellow feeling provides the experiential foundation for our rule-following conduct, and constitutes the evolutionary basis for human sociality. Similarly, gravity in Newtonian physics was a primitive concept known by the work it does in governing the orderly motion of all bodies in the observable universe, as it was known in Newton’s time. Both systems sought to explain and understand observations by means of postulated forces at work in nature, but insensible to human awareness.     

Distributive politics of public goods networks through multistage voting

Public goods networks create conflict between districts needing the network and districts that pay the costs. Thus, it is difficult for pork barrel politicians to achieve logrolling with other districts. I show that logrolling is possible for such politicians if they set their agenda properly. To show this, I model the centralized decision‐making process as a multistage vote among representatives from different districts. I assume the districts are better off if and only if the public good “connects” them to the network. Public goods can be provided universally by setting the agenda properly, even when costs exceed the benefits.     

Distributive politics and economic growth: the Markovian Stackelberg solution

Summary. We generalize the result of Alesina and Rodrik (1994) by showing that their static solution is also a time consistent Stackelberg solution of a differential game between the government and the median voter.Received: 11 June 2001, Revised: 7 February 2003, JEL Classification Numbers: O15, O40, E61, C73.We would like to thank Claus Peter Ortlieb, Nikolaus A. Siegfried, and two anonymous referees for useful comments. The first version of this work was written while Holger Strulik was Marie Curie Research Fellow at the Department of Applied Economics, University of Cambridge, U.K. A research grant of the European Commission is gratefully acknowledged. Correspondence to: H. Strulik     

Competitive politics, simplified heuristics, and preferences for public goods

This paper examines the role of simplified heuristics in the formation of preferences for public goods. Political scientists have suggested that voters use simplified heuristics based on the positions of familiar parties to infer how a proposed policy will affect them and to cast a vote in line with their interests and values. Here, we use a two-stage field-survey experiment to investigate how knowledge of party positions affects policy choices. We followed standard procedures in developing an attribute-based choice experiment on alternative land-use policies in Switzerland. In contrast to the usual formulation, however, the hypothetical costs of the proposed policies were formulated as a percentage change in taxes. The benefit of this formulation relative to the usual absolute money amounts is that the credibility of the (hypothetical) costs for respondents does not depend on respondent income. Furthermore, the formulation allowed us to solicit party positions on the proposed policies. Six out of eight contacted parties provided their positions. We then conducted a split-sample mail survey where we included a table of the party positions with a subsample of the questionnaires. We report six main experimental results. (1) The response rate of the survey was unaffected by the party positions. (2) The proportion of no-choice answers was decreased by forty percent relative to the control. (3) The party information significantly affected the choices directly and in interaction with respondents' general attitudes towards public spending for nature and landscape conservation and thus affected the way how individuals mapped from general attitudes to preferences for specific policies. (4) The information interacted with educational level in only eight out of forty choice sets, suggesting that even the more educated relied on simplified heuristics. (5) Respondents who knew the party positions were more sensitive to the tax attribute. (6) For respondents with medium and higher tax bills, the resulting willingness-to-pay estimates were decreased by a factor of two to ten relative to the control. These findings suggest that the party information helped the respondents to articulate more consistent preferences than in the treatment without the party information.     

Self-selection and variations in the laboratory measurement of other-regarding preferences across subject pools: evidence from one college student and two adult samples

We measure the other-regarding behavior in samples from three related populations in the upper Midwest of the United States: college students, non-student adults from the community surrounding the college, and adult trainee truckers in a residential training program. The use of typical experimental economics recruitment procedures made the first two groups substantially self-selected. Because the context reduced the opportunity cost of participating dramatically, 91 % of the adult trainees solicited participated, leaving little scope for self-selection in this sample. We find no differences in the elicited other-regarding preferences between the self-selected adults and the adult trainees, suggesting that selection is unlikely to bias inferences about the prevalence of other-regarding preferences among non-student adult subjects. Our data also reject the more specific hypothesis that approval-seeking subjects are the ones most likely to select into experiments. Finally, we observe a large difference between self-selected college students and self-selected adults: the students appear considerably less pro-social.     

Regular Distributive Efficiency and the Distributive Liberal Social Contract

We consider abstract social systems of private property, made of n individuals endowed with nonpaternalistic interdependent preferences, who interact through exchanges on competitive markets and Pareto‐improving lump‐sum transfers. The transfers follow from a distributive liberal social contract defined as a redistribution of initial endowments such that the resulting market equilibrium allocation is both: (i) a distributive optimum (i.e., is Pareto‐efficient relative to individual interdependent preferences) and (ii) unanimously weakly preferred to the initial market equilibrium. We elicit minimal conditions for meaningful social contract redistribution in this setup, namely, the weighted sums of individual interdependent utility functions, built from arbitrary positive weights, have suitable properties of nonsatiation and inequality aversion; individuals have diverging views on redistribution, in some suitable sense, at (inclusive) distributive optima; and the initial market equilibrium is not a distributive optimum. We show that the relative interior of the set of social contract allocations is then a simply connected smooth manifold of dimension n ? 1. We also show that the distributive liberal social contract rules out transfer paradoxes in Arrow–Debreu social systems. We show, finally, that the liberal social contract yields a norm of collective action for the optimal provision of any pure public good.     

Bargaining with history-dependent preferences

Two impatient players bargain over a pie of size one according to the infinite alternating-offers procedure. Players’ payoffs depend not only on the outcome but also on the process of the bargaining. Specifically, they prefer impasse to any agreement that gives them lower discounted utility than would have been derived from accepting earlier offers. We characterize the essentially unique subgame perfect equilibrium path, which consists of gradual concessions. The more patient players are, the longer it takes them to reach an agreement. When players become infinitely patient, the efficiency loss is substantial, yet the equilibrium division converges to the Nash solution.     

Economies with price-dependent preferences

With the exception of existence, not much is known of economies where individual preferences may depend on prices. We show that the main properties of competitive equilibria that fall under the general heading of qualitative comparative statics remain true when preferences are price-dependent, provided that the total resources are allowed to vary in the parameter space. The equilibrium set is a smooth manifold diffeomorphic to a Euclidean space; the natural projection is a smooth proper map, with topological degree one; equilibria always exist, and are locally unique for an open and dense set of economies.     

Herding with collective preferences

This paper studies a simple model of observational learning where agents care not only about the information of others but also about their actions. We show that despite complex strategic considerations that arise from forward-looking incentives, herd behavior can arise in equilibrium. The model encompasses applications such as sequential elections, public good contributions, and leadership charitable giving.     

Regular Distributive Social Systems

I consider abstract social systems where individual owners make gifts according to their preferences on the distribution of wealth in the context of a noncooperative equilibrium. I define a condition of regularity and a condition of strong regularity of these social systems. I prove notably that: regularity is generic, and implies the local uniqueness of equilibrium and the uniqueness of status quo equilibrium; strong regularity is nongeneric, implies that an equilibrium exists for all initial distributions of wealth, whenever an equilibrium exists for one of them, and implies the connectedness of the range of the equilibrium correspondence. These properties have strong implications for distributive theory and policy, summarized in a general hypothesis of perfect substitutability of private and public transfers. The formulation and discussion of this hypothesis lead to a general assessment of the explanatory power of the theory.     

Redistributive politics with distortionary taxation

This paper proposes a first step towards a positive theory of tax instruments. We present a model of redistributive politics that extends those of Myerson [R. Myerson, Incentives to cultivate minorities under alternative electoral systems, Amer. Polit. Sci. Rev. 87 (1993) 856-869] and Lizzeri and Persico [A. Lizzeri, N. Persico, The provision of public goods under alternative electoral incentives, Amer. Econ. Rev. 91 (2001) 225-239]. Two politicians compete in terms of targeted redistributive promises financed through distortionary taxes. We solve for the case of both targetable and non-targetable taxes. We prove that there is an imperfect efficiency-targetability trade off on the tax side. Politicians prefer targetable taxes over non-targetable ones, especially when the latter are less efficient. Yet, targetable taxation is always used even when it is very inefficient compared to non-targetable taxes.     

Distributive justice in taxation

A classical criterion for apportioning taxes is that all should sacrifice equally in loss of utility. Suppose that a method of apportioning taxes is continuous and has the following four properties: (i) the way that taxpayers split a given tax total depends only on their own taxable incomes; (ii) an increase in the tax total implies that everyone pays more; (iii) every incremental increase in tax is apportioned according to taxpayers' current after-tax incomes; (iv) the ordering of taxpayers by pre-tax income and after-tax income is the same. Then there exists a utility function relative to which all sacrifice equally.     

Market design with endogenous preferences

This paper explores the interdependence between market structure and an important class of cognitive biases. Starting with a familiar bilateral monopoly framework, we characterize the endogenous emergence of preference distortions during bargaining which cause negotiators to perceive their private valuations differently than they would outside the adversarial negotiation context. Using this model, we then demonstrate how a number of external interventions in the structure and/or organization of market interactions (occurring before trade, after trade, or during negotiations themselves) can profoundly alter the nature of these dispositions. Our results demonstrate that many such interventions frequently (though not always) share qualitatively similar characteristics to market interventions that are often proposed for overcoming more conventional forms of market failure. Nevertheless, our analysis underscores the importance of understanding the precise link between cognitive failures and market structure prior to the implementation of any particular proposed reform.     

Repeated games with present-biased preferences

We study infinitely repeated games with perfect monitoring, where players have β-δ preferences. We compute the continuation payoff set using recursive techniques and then characterize equilibrium payoffs. We then explore the cost of the present-time bias, producing comparative statics. Unless the minimax outcome is a Nash equilibrium of the stage game, the equilibrium payoff set is not monotonic in β or δ. Finally, we show how the equilibrium payoff set is contained in that of a repeated game with smaller discount factor.     

Nonlinear pricing with self-control preferences

A basic assumption of economics is that consumers choose what they want. However, many consumers find it difficult to stop overeating, overspending, smoking, procrastinating, etc, even though they want to. In reality, consumers have temptation and it is psychologically costly to exercise self-control. To clarify the implications of the existence of temptation and self-control costs, this paper studies a firm's optimal selling strategy exploiting the behavioral features of consumers. We characterize optimal nonlinear pricing schemes for a monopoly when self-control is costly for consumers. Since consumers have a preference for commitment, the firm faces a trade-off between offering a small menu that makes the consumers’ self-control easier and offering a large menu that achieves better price discrimination. We show that the optimal menu resembles the one in the standard nonlinear pricing problem with a price ceiling, where the upper bound on prices is determined endogenously by a participation constraint. The ceiling motivates the firm to offer a relatively flat and compact price schedule, serving more consumers with low demand. The characterization also shows that the firm may earn less if consumers have temptation.     

Increasing risk with state-dependent preferences

A definition of increasing risk for state-dependent preferences is introduced and its usefulness for the analysis of concrete economic problems is illustrated. For classes of individuals with the same reference set the notion of increasing risk has three equivalent characterizations analogous to those obtained in the case of state-independent preferences. The definition is used to conduct a comparative statics analysis of a portfolio problem with state-dependent preferences.