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Instituto de Análisis Económico

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  • Charness, Gary B
  • Brandts, Jordi

Abstract

This paper presents evidence that the willingness to punish an unfair action is sensitive to whether this action was preceded by a deceptive message. One player first sends a message indicating an intended play, which is either favorable or unfavorable to the other player in the game. After the message, the sender and the receiver play a simultaneous 2x2 game, in which the sender may or may not play according to his message. Outcome cells may, hence, be reached following true or false messages. In the third stage the receiver may (at a cost) punish or reward, depending on which cell of the simultaneous game has been reached. We test whether receivers’ rates of monetary sacrifice depend on the process by which an outcome is reached. We study two decision-elicitation methods: the strategy and the direct response methods. For each method, deception more than doubles the punishment rate as a response to an action that is unfavorable to the receiver. We also find evidence that 17-25% of all participants choose to reward a favorable action choice made by the sender, even though doing so leaves one at a payoff disadvantage. Our results reflect on current economic models of utility and have implications for organizational decision-making behavior.

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Bibliographic Info

Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt2rf5p3rs.

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Date of creation: 01 Oct 2002
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Handle: RePEc:cdl:ucsbec:qt2rf5p3rs

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Keywords: Deception; retribution; process satisfaction; strategy method;

References

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  1. Brandts, J. & Sola, C., 1998. "Reference Points and Negative Reciprocity in Simple Sequential Games," UFAE and IAE Working Papers 425.98, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Ernst Fehr & Simon Gaechter, 1999. "Cooperation and Punishment in Public Goods Experiments," CESifo Working Paper Series 183, CESifo Group Munich.
  3. Amartya Sen, 1997. "Maximization and the Act of Choice," Econometrica, Econometric Society, vol. 65(4), pages 745-780, July.
  4. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
  5. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  6. Gary E. Bolton & Jordi Brandts & Elena Katok, 2000. "How strategy sensitive are contributions?," Economic Theory, Springer, vol. 15(2), pages 367-387.
  7. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
  8. W. Chan Kim & Renée A. Mauborgne, 1996. "Procedural Justice and Managers' In-Role and Extra-Role Behavior: The Case of the Multinational," Management Science, INFORMS, vol. 42(4), pages 499-515, April.
  9. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  10. Dufwenberg, Martin & Kirchsteiger, Georg, 2004. "A theory of sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 47(2), pages 268-298, May.
  11. Boles, Terry L. & Croson, Rachel T. A. & Murnighan, J. Keith, 2000. "Deception and Retribution in Repeated Ultimatum Bargaining," Organizational Behavior and Human Decision Processes, Elsevier, vol. 83(2), pages 235-259, November.
  12. Joseph Farrell., 1986. "Meaning and Credibility in Cheap-Talk Games," Economics Working Papers 8609, University of California at Berkeley.
  13. Cooper, Russell, et al, 1992. "Communication in Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 739-71, May.
  14. Schotter Andrew & Weigelt Keith & Wilson Charles, 1994. "A Laboratory Investigation of Multiperson Rationality and Presentation Effects," Games and Economic Behavior, Elsevier, vol. 6(3), pages 445-468, May.
  15. W. Guth & R. Schmittberger & B. Schwartz, 2010. "An experimental analysis of ultimatum bargaining," Levine's Working Paper Archive 291, David K. Levine.
  16. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February.
  17. Alvin E Roth & J K Murnighan, 1997. "The rule of information in bargaining: an experimental study," Levine's Working Paper Archive 1631, David K. Levine.
  18. Blount, Sally, 1995. "When Social Outcomes Aren't Fair: The Effect of Causal Attributions on Preferences," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(2), pages 131-144, August.
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