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Social comparisons and reference group formation: Some experimental evidence

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  • McDonald, Ian M.
  • Nikiforakis, Nikos
  • Olekalns, Nilss
  • Sibly, Hugh

Abstract

We experimentally investigate reference group formation and the impact of social comparisons in a three-player ultimatum game. The players compete in a real-effort task for the role of the proposer. The role of the responder is randomly allocated to one of the other two participants. The third participant, the non-responder, receives a fixed payment – our treatment variable – and makes no decision. Knowing the size of this payment, the proposer makes a take-it-or-leave-offer to the responder. Most responders appear to ignore the non-responder when the payment the latter receives is low, but not when it is high. As a result, the existence of a non-responder and the payment they receive has a pronounced effect on bargaining outcomes and increases overall rejection rates. We present a simple model in which agents select the members of their reference group strategically to reduce the extent of cognitive dissonance they experience. The model produces results consistent with our experimental findings.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 79 (2013)
Issue (Month): C ()
Pages: 75-89

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Handle: RePEc:eee:gamebe:v:79:y:2013:i:c:p:75-89

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Social comparisons; Ultimatum bargaining; Laboratory experiments; Cognitive dissonance; Real-effort;

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References

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Cited by:
  1. Timothy N. Cason & Lata Gangadharan & Nikos Nikiforakis, 2010. "Can Real-Effort Investments Inhibit the Convergence of Experimental Markets?," Purdue University Economics Working Papers 1232, Purdue University, Department of Economics.
  2. Nikos Nikiforakis & Helen Mitchell, 2014. "Mixing the Carrots with the Sticks : Third Party Punishment and Reward," Working Papers halshs-00924995, HAL.
  3. Nikos Nikiforakis & Helen Mitchell, 2013. "Mixing the Carrots with the Sticks : Third Party Punishment and Reward," Working Papers 1338, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  4. James Bland & Nikos Nikiforakis, 2013. "Tacit Coordination in Games with Third-Party Externalities," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2013_19, Max Planck Institute for Research on Collective Goods.

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