Social Preferences

Matteo Ploner
November 20, 2014

is is a pi
Th

e
You and another in the room should share the pie

There are 10 slices

You can claim between 0 and 10 slices and the other can do the same
If the sum of what you claim (xi ) and what the other claims (xi )
is lower or equal than 10 you both get what you claimed
If the sum of what you claim (xi ) and what the other claims (xi )
is larger than 10 you both get nothing

= xi i f xi + x j 10
i
=0 i f xi + x j > 10
You do not know who the other is and cannot talk to the others in the
room
What is your claim? Write it on a piece of paper

Outline
Contents
1 Bounded Selfishness 2
1.1 Behavioral Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Stylized Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2 Fairness 6
2.1 Fairness Ideals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Inequity Aversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3 Altruism 12
3.1 Altruism and Rationality . . . . . . . . . . . . . . . . . . . . . . . . . . 13

4 Beliefs 15
4.1 Reciprocity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Guilt Aversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

5 Morality 20
5.1 Self-image . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Deception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

A References 24

B Assignments 25

1 Bounded Selfishness

Contents

1.1 Behavioral Economics

Bounded Selfishness

The standard economic model of human behavior includes (at least) three
unrealistic traits: unbounded rationality, unbounded willpower, and un-
bounded selfishness. These three traits are good candidates for modifica-
tion.[Mullainathan and Thaler, 1998]
Models of social preferences focus on bounded selfishness [on this see also
Bolton, 1998]
 Enlarge the scope of motivation [Becker, 1992]
Ui = f (xi , x j6=i )

Generally, rationality and willpower are kept unbounded

Neoclassical Repair

1.2 Stylized Facts

Social Value Orientation

The Social Value Orientation (SVO) is a popular way to measure other-

regarding concerns [e.g Liebrand, 1984]

Individuals make several allocation choices [Murphy et al., 2011]

Item c1 c2 c3 c4 c5 c6 c7 c8 c9 Ind. Alt. Com. Eff. Ineq.
xS 85 85 85 85 85 85 85 85 85
1 All 1 9 1 1
xO 85 76 68 59 50 41 33 24 15
xS 85 87 89 91 93 94 96 98 100
2 9 9 1 9 9
xO 15 19 24 28 33 37 41 46 50
xS 50 54 59 63 68 72 76 81 85
3 9 1 9 9 9
xO 100 98 96 94 93 91 89 87 85
xS 50 54 59 63 68 72 76 81 85
4 9 1 9 1 4(5)
xO 100 89 79 68 58 47 36 26 15
xS 100 94 88 81 75 69 63 56 50
5 1 9 1 All 5
xO 50 56 63 69 75 81 88 94 100
xS 100 98 96 94 93 91 89 87 85
6 1 9 1 9 9
xO 50 54 59 63 68 72 76 81 85
xS 100 96 93 89 85 81 78 74 70
7 1 9 1 9 6
xO 50 56 63 69 75 81 88 94 100
xS 90 91 93 94 95 96 98 99 100
8 9 1 9 All 5
xO 100 99 98 96 95 94 93 91 90
xS 100 94 88 81 75 69 63 56 50
9 1 9 1 1 4
xO 70 74 78 81 85 89 93 96 100
xS 100 99 98 96 95 94 93 91 90
10 1 9 1 9 7
xO 70 74 78 81 85 89 93 96 100
xS 70 74 78 81 85 89 93 96 100
11 9 1 9 All 5
xO 100 96 93 89 85 81 78 74 70
xS 50 56 63 69 75 81 88 94 100
12 9 1 9 9 8(7)
xO 100 99 98 96 95 94 93 91 90
xS 50 56 63 69 75 81 88 94 100
13 9 1 9 All 5
xO 100 94 88 81 75 69 63 56 50
xS 100 96 93 89 85 81 78 74 70
14 1 9 1 1 3
xO 90 91 93 94 95 96 98 99 100
xS 90 91 93 94 95 96 98 99 100
15 9 1 9 1 2(3)
xO 100 94 88 81 75 69 63 56 50

Distribution of Types

The results of a recent experiment

3
 0.25
COMP (0.3%) INDIVID (43.8%) PROSOC (56%) ALTR (0%)

0.20
0.15
Freq (rel.)

0.10
0.05
0.00
40 20 0 20 40 60 80

SVO Angle

Main types are Individualistic and Prosocial (inequity averse+efficiency

seekers)

Dictating allocations

[Engel, 2011]

A subject (dictator) is asked to share an endowment with another subject

(Recipient)

The meta-study by Engel covers 129 papers (41433 observations)

On average, giving is 28.35% of the endowment

Motivations

Why do people give in the Dictator Game?

What does it mean to be prosocial?

Why do people donate to charity organizations?[Landry et al., 2006]

Altruism?
Equity concerns?

4
1.3 Overview
A Model
A jack-of-all-trades model
VO (m, y) = (1 ? )m + ? y
where ? = [0, 1] if m y and ? = k with k 0 if y > m.
is the weight I put on your payoff
> 0 implies that I am altruistic
k represents how much my altruism is reduced when your payoff is larger
than mine because of inequity aversion
captures diminishing marginal utility of money

VO (m, y) = (1 )m + y
FS Fehr and Schmidt [1999]
0, = 1 and k >
CR Charness and Rabin [2002] and Engelmann and Strobel [2004]
0, = 1 and k [0, ]
AM Andreoni and Miller [2002], Cox et al. [2007], Fisman et al. [2007]
1 and k = 0
FS
=.4
=1
k=.7
y

m
CR
=.4
=1
k=.2
y

m
AM
=.4
=.6
k=0
y

m
2 Fairness

Contents

2.1 Fairness Ideals

Fairness as Entitlement

Konow [2003] presents an extensive review of fairness principles

Entitlement as an important determinant of fairness [see also Adams,

1963]

Konow [2000] provides us with a definition of entilement

The Accountability Principle

The entitlement varies in direct proportion to the value
of the subjects relevant discretionary variables, ignoring
other variables, but does not hold a subject accountable
for differences in the values of exogenous variables.
Y = (x+ , k+ ) where x is a discrectionary component and K is an ex-
ogenous endowment

A (simple) model of fairness and entitlement

Two individuals i, j jointly produce an output y = yi + y j

The total inputs are x = xi + x j
The fair allocation is given by
i = xxi y
EXAMPLE
i works 10 minutes (xi = 10) and j works 15 minutes (x j = 15)
Jointly they produce 25 units of something (y = 25)
The equitable allocations are
i = 10 15
25 25 = 10, j = 25 25 = 15,

6
Cognitive Dissonance and Self-Deception

In Konow there is a tension between fainess consideration and self-interest

Cognitive dissonance

A subject may experience some displeasure when appropriating more

than what is perceived as fair
[0, y] is what subject i believes is fair
f (w, ) captures the cost of being unfair
w = y , and [0, 1] captures the relevance of cognitive dis-
sonance

Self deception

Individuals may selfishly manipulate beliefs about

However, this comes at a cost c(z, ) =
with [0, 1] capturing the cost of self-deception

An individual is maximizing the following objective function

u(y, , , , ) = v(y) f (y , ) c( , )

Predictions

Selfish (0, 1)
honest ( = 1) = < y y
self-deceptive ( (0, 1)) < < y y
Fair ( = = 1) = = y < y

Visions of Fairness

Cappelen et al. [2007] compare three prominent ideals of fairness

Strict egalitarianism, Libertarianism, Liberal egalitarianism

The model

Individual i generates an income xi = ai qi that is function of their in-

vestment qi (discretionary) and of the return of the investment ai (ex-
ogeneous)

7
 Income generated by two individuals 1, 2 has to be distributed among the
two

X(a, q) = x1 + x2

Both 1 and 2 state how much they claim for themselves

An individual is maximizing

2
ymk(i) (a,q)
Vi (y, a, q) = y i 2X(a,q)
where
mk(i) is a fairness ideal (how much is fair income)
> 0 weight attached to own income
i weight attached to fairness considerations
The optimal proposal is y = mk(i) (a, q) + X(a,q)
i
with y = X for = 0

Alternative Fairness Ideals

Strict Egalitarianism: total income should be distributed equally

mSE (a, q) = X(a, q)/2

Liberal egalitarianism: give everyone what produced

mL (a, q) = a1 q1
It does not matter if due to factors under control (q1 ) or not (a1 )

Libertarian: give everyone according to their inputs

q1
mLE (a, q) = q1 +q2 X(a, q)
Similar to accountability principle of Konow

Cappelen et al. [2007] experimentally investigate types distribution in a

modified DG

The estimates
43.5% are Strict Egalitarian, 38.1% Liberal Egalitarian, and 18.4%
Libertarian

8
2.2 Inequity Aversion
A piece-wise Linear Model

Fehr and Schmidt [1999]

1 1
Ui (x) = xi i max[x j xi , 0] i n 1 max[xi x j , 0]
|{z} n1 j6=i j6=i
(1) | {z } | {z }
(2) (3)

(1) utility from monetary gains, (2) dis-utility from disadvantageous alloca-
tions, (3) loss from advantageous allocations

A manageable piece-wise linear model

A difference in payoffs generates a psychological cost, both when be-

ing better-off than the other ( ) and when being worse-off ()
The psychological cost of being worse-off than the other is always
greater than that of being better-off than the other (i < i )
The loss of destroying one unit of utility when being better off is
always lower than 1

Behavior in the UG

1 1
Ui (x) = xi i max[x j xi , 0] i max[xi x j , 0]
n 1 j6=i n1
j6=i

Application to the two-players UG

Player 1 offers a share s [0, 1] to Player 2

Given utility function Ui (x) any offer s 0.5 is accepted and offers
are rejected if s < s0 (2 ) 2 /(1 + 22 ) < 0.5
If s 0.5 the utility from accepting is U2 (s) = s2 (|{z}
s (1 s)) =
| {z }
x2 x1
s 2 (2s 1) which is always positive for 2 < 1
If s < 0.5 the responders accepts if U2 (s) = s2 (1|{z}
s |{z}
s )
x1 x2
0 s s0 ( 2)
2
1+22 < 0.5

9
Behavior in the UG (II)

If Player 1 knows the preferences of Player 2

= 0.5 i f 1 > 0.5
s [s0 (2 ), 0.5] i f 1 = 0.5
= s0 (2 ) i f 1 < 0.5

If 1 > 0.5 then utility is increasing in s for s 0.5 and thus proposers prefer
to share resources

Estimates of and

Blanco et al. [2011](B&al) run an experiment to estimate and of Fehr

and Schmidts model (F&S)
A modified DG (plus other standard games like UG and PGG)
Dictator chooses between 20 0 (Option A) and x x with x
{0, ..., 20} (Option B)
A summary of estimated parameters by Blanco et al. [2011](B&al) and Fehr
and Schmidt [1999] (F&S)

Freq(%) Freq(%)
(F&S) (B&al) (F&S) (B&al)
< .4 30 31 < .235 30 29
Source: Blanco et al.
.4 < .92 30 33 .235 < .5 30 15
.92 < 4.5 30 23 .5 40 56
4.5 10 13
[2011]s Table 2

Fairness as Fair Share

The ERC model by Bolton and Ockenfels [2000]: vi = vi (yi , i ), where yi

is the monetary gain of individual i and i is the relative payoff of i (with
respect to the fair share).
i = 2 means that the payoff of player i is two times the equitable payoff
(1/n).

(
yi /c
1/n if c > 0
i = i (yi c, n) =
1 if c = 0

10
 where c = nj=1 y j is the sum to be distributed among players and n is
the number of players

Let define k = c/n as the average (equitable) payoff

Then, yi = ki

i = 1.5 is the argmax vi (for a given k)

Keep 1.5 the average payoff

Distribution of income is not very relevant

Same predictions for a very unequal or a very equal society

An Experimental Test

Engelmann and Strobel [2004] provide a test of inequity aversion against

efficiency concerns or maximin preferences

Inequity aversion minimize the distance in payoffs

They compare two models: ERC [Bolton and Ockenfels, 2000]
and F&S [Fehr and Schmidt, 1999]
Efficiency concerns maximize the sum of payoffs
Maximin preferences maximize the payoff of the individual obtain-
ing the smallest payoffs

An excerpt of Table 2

11
Efficiency vs Inequity

Main findings

Inequity aversion does not provide a good description of observed be-

havior
Fehr and Schmidt [1999] performs relatively better than Bolton and
Ockenfels [2000]

A better account is provided by a combination of efficiency concerns, max-

imin preferences, and selfishness

Efficiency Concerns

The model of Charness and Rabin [2002]


(1 )y + x i f y x
UY (x , y ) =
(1 )y + x i f y < x

where , are coefficients capturing concerns for others welfare; X and

Y are the monetary payoffs of the two players.

Different types are characterized by different and

Selfish ( = = 0)
No concerns for others
Difference-averse ( < 0 < < 1)
Decreasing (increasing) in own (others) payoff when better off
and increasing (decreasing) in own (others) payoff when worse
off
Welfare-enhancing (1 > 0)
Higher payoff for self and other always desirable
Competitive ( 0)
Increasing in own payoff and decreasing in others payoff

3 Altruism
Contents

3.1 Altruism and Rationality

Altruism and Rationality

Can altruism be the expression of a well-behaved preference ordering?

The work of Andreoni and Miller [2002] investigates whether altruis-

tic choices could be generated by a continuous, convex, and monotonic
utility function

The test is performed by checking behavior against the axioms of revealed

preferences

If subjects conform to the axioms their behavior is said to be rational

Altruism can be seen as a rational self-interested act

The Framework

Subjects maximize a general form of utility Us = us (s , o )

The Revealed Preferences approach

Directly Revealed Preferred

A is directly revealed preferred to B if B was in the choice set
when A was chosen
Indirectly Revealed Preferred
If A is directly revealed preferred to B, B is directly revealed pre-
ferred to C, . . . to Y, and Y is directly revealed preferred to Z
A is indirectly revealed preferred to Z
Generalized Axiom of Revealed Preferences (GARP)
If A is indirectly revealed preferred to B, then B is not strictly
directly revealed preferred to A, that is, A is not strictly within the
budget set when B is chosen.
GARP is both necessary and sufficient condition for the existence of
well-behaved preferences, given linear budget constraints
According to Afriats Theorem these statements are equivalent [on this
see Fisman et al., 2007]

13
 the data satisfy GARP
there exists a nonsatiated utility function that rationalizes the data
there exists a continuous, increasing, concave, nonsatiated utility
function that rationalizes the data

Violation of GARP no rationality

Violation of GARP: An example

An actual violation of GARP reported by Andreoni and Miller [2002]

C is indirectly revealed preferred to B

C is directly revealed preferred to A and A is directly revealed pre-

ferred to B

B is strictly directly revealed preferred to C

violation of GARP

Main Findings

Altruism can be captured by quasi-concave utility functions

Altruistic preferences are rational

Classification of rational preferences

Selfish U(s , o ) = s
Leontief U(s , o ) = min{s , o }

14
 Perfect Substitutes U(s , o ) = s + o

43% of participants fit one of these categories perfectly

Of these, 53% are S, 33% are L, and 14% are PS

The others are classified by estimating parameters of a CES utility

function

Heterogeneity at the individual level

Theories should explain variance across individuals

Preferences for Giving

Fisman et al. [2007] extends the Andreoni and Miller [2002] to choices
involving 3 individuals

Distinction between
Preferences for giving: self vs. others
Social Preferences: other vs. other
Us = vs (s , ws (o ), where, under some separability assumptions, vs (s , ws (o )
represents preferences for giving and ws (o ) stands for social prefer-
ences

The authors assume that the utility functions are of the CES family
0 (/ 0 ) (1/)
 
0
Us = (s ) + (1 )( (A ) )

where,
( 0 ) is the relative weight on self vs. others (other vs. other)
( 0 ) captures the curvature of the indifference curves for giving
(social preferences)
If = 1/3 and 0 = 1/2 Us = s + A + B for , 0 1(purely
utilitiarian)

For the majority of participants both kinds of preferences are in the direction
of maximizing aggregate payoffs, rather than minimizing distances

4 Beliefs
Contents

4.1 Reciprocity
Intention- and Outcome- Based Models

McCabe et al. [2003] test intention-based (IB) models against outcome-

based (OB) models [i.e., Fehr and Schmidt, 1999, Bolton and Ockenfels,
2000]

Compare outcomes in two experimental conditions

Entering the game is a signal of trust

Enter = 17/27(62.96%), p1 = 11/17(64.71%)

The trust signal is not available

p2 = 9/27(33.33%)

Intentions matter and trigger reciprocity

Reciprocity and Fairness

Rabin [1993] relies on tools of psychological game theory [Geanakoplos

et al., 1989]

Utility is function of

16
 Material outcomes from an action, beliefs about actions of the partner
and beliefs on beliefs of the partner
When player 1 beliefs that player 2 is going to behave nicely,
player 1 has an incentive to behave nicely too (but the opposite
holds too).
Ui = i + fj (1 + fi )
where i is the payoff of the interaction, fj are beliefs about kind-
ness of Player j and fi measures kindness of player i
Beliefs about kindness of Player j ( fj > 0) induce kindness in Player
i ( fi > 0)
Beliefs about spitefulness of Player j ( fj < 0) induce spiteful behavior
in Player i ( fi < 0)
The sign of the kindness function f is defined by the difference
between actual payoff of the other and a measure of equitable
payoff (i.e., the average payoff)

Reciprocity and Fairness: The Kindness Function

j (b j ,ai ) ej (b j )
fi (ai , b j ) hj (b j ) min
j (b j )

a1 S1 and a2 S2 are the strategies of the Player 1 and Player 2

respectively
b1 S1 and b2 S2 are Player 2s beliefs about the strategy of Player
1 and Player 1s beliefs about the strategy of Player 2, respectively

Equitable payoff ej (b j ) = [ hj (b j ) + lj (b j )]/2

hj (b j ) is the highest payoff obtainable by j and lj (b j ) is the lowest payoff

among points that are Pareto-efficient

min
j (b j ) is the worst possible payoff obtainable by Player j

Falk and Fischbacher [2006] and Dufwenberg and Kirchsteiger [2004] con-
msider possible extensions to sequential games

4.2 Guilt Aversion

Guilt

When individuals do not meet others expectations may feel guilty

17
 Let-down aversion

Battigalli and Dufwenberg [2007] present a conceptualization of guilt in

games

In simplified terms

A player j forms some expectations E j about her material payoff m j

in the interaction
An agent feels let-down if she does not get as much as expected
A disappointment function: D j = max{0, E m j }
The agent i knows how much of the disappointment is due to her ac-
tions
Gi j = D j minD j
Then the utility of i is given by
ui = mi i j Gi j
The parameter i j is a measure of is guilt sensitivity

EXAMPLE: An application to a DG

The dictator believes that the recipients expects to receive 40% of the
endowment
The utility of the dictator is given by Ui = 1 x max{0, .4 x},
with 0 x 1
If = 0 x = 0
If > 1 x = .4

Guilt Aversion

Player i lets player j down if, as a consequence of is choices, j gets a lower

payoff that what (s)he expected

Player is sense of guilt reflects let-down aversion

The more j is let down, the higher is sense of guilt

Charness and Dufwenberg [2006]s experiment on guilt aversion

18
 The opportunity to communicate the intention to roll expressed by B in-
creases the IN&Roll outcomes

B would feel guilty if not rolling

Is it Guilt? (I)

Vanberg [2008] replicates the experiment of Charness and Dufwenberg [2006]

(with 8 independent rounds)

In a switch condition the participants face a different recipient than the one
they communicated with

Recipients do not know of the switch while dictators know and know
the promise made by the the other
Keeping promises more Roll in the no-switch
Guilt aversion no difference between roll/no-roll
People are committed to their own promise and not to others expec-
tations

Is it Guilt? (II)

Correlation between 2nd order beliefs and behavior in DG may be due to

guilt aversion

I believe the other believes I am sending x thus I send x not to disap-

point the other

Ellingsen et al. [2010] correlation may be due to false consensus

Everyone behaves (and thinks) like me and thus the other must believe
I am sending x

Ellingsen et al. [2010] elicit first order believes of recipient and submits
them to the matched dictators

19
 No correlation is found it cannot be guilt aversion !

The result is replicated also in trust games

The debate is open . . .

5 Morality

Contents

5.1 Self-image
Shame in the Game

Dana et al. [2006] studies behavior in a variation of a $10 Dictator Game

Do dictators try to maintain a positive self-image or are they genuinely

concerned about others welfare?

The dictators can freely decide to leave the DG and receive $9

Dictators (sitting in a separate room) decide the transfer

Then, before the transfer happens they are told (unannounced) that
they can keep the recipients instructions and not pass them to the other
room
If they do not pass the instructions the recipient receives nothing and
is not informed of the existence of the game

A selfish rational will enter the game and claim the $10

A prosocial player will enter the game and choose following her preferences

However, a player may exit the game to save on psychological costs

due to the loss in self-image.

As a control also a Private condition is implemented

The others receive the transfer but are not told that it comes from a DG
(presented as a lump sum)
5.2 Deception
The Consequences of Cheating

Gneezy [2005] identifies 4 types of lies, according to their monetary conse-

quences for the liar and the recipient (labels are not in the original)

Beneficial Lies: beneficial for both sides or, at least, do not harm
(Your new haircut is amazing!)
Generous Lies: beneficial for the recipient, but are expensive for the
liar (I am happy to help you with the homeworks.)
Spite Lies: do not help the liar, but harm the other (Dear Mark, your
idea of a social network called Facebook is a failure.)
Opportunistic Lies: help the liar at the expenses of the recipient (This
Fiat Duna I am selling is a masterpiece of the automotive industry.)

Focus is on the last kind

Typical economic lies in conditions of information asymmetry

A working definition
A successful or unsuccessful deliberate attempt, without fore-
warning, to create in another a belief that the communicator con-
siders to be untrue in order to increase the communicators payoff
at the expense of the other side

A Sender-receiver Game

Two players

Player 1 (Sender) and Player 2 (Receiver)

Two possible monetary distributions:

A and B

Player 1 can choose between two statements

Message A: Option A will earn you more money than option B

Message B: Option A will earn you more money than option B

Player 2 freely chooses whether to follow the signal or not

Only Player 1 knows which statement is true

21
 There is a conflict of interest between telling the truth and maximizing
own payoff but Player 2 does not know this

Different treatments

Results

A dictator experiment is run to check whether choices are due (only) to

distributional considerations

If this was the case results between sender-receiver game and dictator
game should not differ a lot

Result 1: comparison across treatments of deception

For a given earning, they cheat less when damages for the other are
bigger
For a given damage, they cheat more when earnings are bigger
Incentive matters in a other-regarding perspective

Result 2: comparison between deception and dictator game

Less opportunistic behavior when it involves lying

It is not only a matter of consequences

22
The Importance of (Not) Being Honest

Fischbacher and Fllmi-Heusi [2013] study cheating in a simple die-under-

the-cup setting

Participants can privately toss a die and earn from the toss

Base
CHF 1 2 3 4 5 0
4 control treatments

1. High stakes

CHF 3 6 9 12 15 0
2. Dictator-like

CHFi 1 2 3 4 5 0
CHF j6=i 4 3 2 1 0 5
3. Experienced players
4. Double-blind

Impossible to detect the cheaters !

A Bit (Dis)Honest
Fischbacher and Follmi-Heusi Lies In Disguise 533

35.0%***
33.3%
27.2%***
Percentage

16.7% 12.6%**
11.6%***
6.4%*** 7.2%***

0.0%
0 1 2 3 4 5
Payoff reported

F IGURE 1. Percentage of reported number of subjects in baseline experiment; first participation

only (stars display the significance of two-sided binomial test that the observed percentage differs
from 16.7%; *10% level, **5% level, ***1% level).

the 1% level (p < 1%)). Numbers below 4 are significantly less frequently reported
than the expected true value of 16.7% (1/6). The percentages of numbers 4 and 5 are
significantly above the expected 16.7% (see binomial tests in Table 1).

Honest Higher numbers appear with higher probability. With the exception of the
comparison between 0 and 1 as well as between 2 and 3 the frequency of higher
numbers is even significantly higher than that of any lower offer.3 This monotonically
increasing distribution implies that some subjects tend to report a number higher than
they actually rolled. If we assume that people do not lie to their disadvantage, the
positive share of subjects reporting zero shows that at least some people are honest.
f6 > 0 The fraction of people who reported a payoff of 0 gives us the possibility to estimate
the fraction of honest people. Assuming that no person reporting a payoff of zero is
lying, we can estimate the percentage of honest people to be as large as 39%.4 A
homo economicus type suffers no cost when lying. Hence, he would always report a
5. Our results indicate that the percentage of people acting as income maximizers can

Economists be estimated at maximum to be 22%.5 Another interesting observation is that not all
lying subjects lie maximally. Significantly more than 1/6 of the subjects report 4. This

3. One-sided binomial test whether, when restricting the data to two numbers, these two numbers occur
with probability different from 0.5. For all pairs with the exception of (0,1) and (2,3), the conditional

f5 > 1/6 probability for the higher number is significantly above 1/2 at the 5% level.
4. Assuming that unconditionally honest people in fact roll a uniform distribution of numbers, it is
reasonable to take the number of people reporting a payoff of 0 to estimate the percentage of honest people
in each number reported. As 6.4% reported a payoff of 0, we can estimate the percentage of unconditionally
honest people at 6*6.4% = 39%. If there were also people who report payoff of 0 although they rolled
another number, the 39% is an upper limit for the number of honest people.
5. In the baseline treatment, 35% reported a 5. Assuming that nobody who has actually rolled a 5 reports

Cheaters with Remorse anything other than 5, we can estimate that the maximal percentage of people acting as a homo economicus
type is 22% ((35% 17%)*6/5). The multiplication with 6/5 is necessary to take into account those income
maximizers who actually rolled a 5.

f4 > 1/6

23
 About cheating int the control sessions

High stakes ' Base

Dictator-like ' Base
Experienced > Base
Double-blind ' Base

A References
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B Assignments
Assignment 1
Consider a standard dictator game: player i can choose how to split 10
with another player j
Prove whether the following statement is true
The Fehr and Schmidt [1999] model predicts that player i is always
going to keep 5 for herself and give 5 to j

25
 Table 1: Possible allocations
Allocation
(1) (2) (3)
Player 1 6 6 8
Player 2 5 5 5
Player 3 5 4 5

Assignment 2

Consider the following allocation choice

Please state which of the three allocations a Player 2 is going to choose

when...

she has preferences la Charness and Rabin [2002] with = = 0

she has preferences la Fehr and Schmidt [1999]
she has preferences la Bolton and Ockenfels [2000]
she has preferences la Charness and Rabin [2002] with 1 >
0

26