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Social Comparisons and Reference Group Formation: Some Expermental Evidence

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  • Ian McDonald
  • Nikos Nikiforakis
  • Nilss Olekalns
  • Hugh Sibly

Abstract

We investigate reference group formation and the impact of social comparisons on ultimatum bargaining using a laboratory experiment. Three individuals compete in a real-e¤ort task for the role of the proposer in a three-player ultimatum game. The role of the responder is randomly allocated. The third individual receives a ?fixed payment - our treatment variable - and makes no decision. The existence of a non-responder has a dramatic e¤ect on bargaining outcomes. In the most extreme treatment, more than half of the o¤ers are rejected. Behavior shows individuals exhibit self-serving bias in the way they de?ne their reference groups.

Suggested Citation

  • Ian McDonald & Nikos Nikiforakis & Nilss Olekalns & Hugh Sibly, 2009. "Social Comparisons and Reference Group Formation: Some Expermental Evidence," Department of Economics - Working Papers Series 1069, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1069
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    3. Cason, Timothy N. & Gangadharan, Lata & Nikiforakis, Nikos, 2011. "Can real-effort investments inhibit the convergence of experimental markets?," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 97-103, January.
    4. James Bland & Nikos Nikiforakis, 2013. "Tacit Coordination in Games with Third-Party Externalities," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2013_19, Max Planck Institute for Research on Collective Goods.
    5. Riyanto, Yohanes E. & Zhang, Jianlin, 2013. "The impact of social comparison of ability on pro-social behaviour," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 47(C), pages 37-46.
    6. Timothy N. Cason & Lata Gangadharan, 2022. "Gender, Beliefs, and Coordination with Externalities Approach," Purdue University Economics Working Papers 1330, Purdue University, Department of Economics.
    7. James Andreoni & Nikos Nikiforakis & Jan Stoop, 2017. "Are the Rich More Selfish than the Poor, or Do They Just Have More Money? A Natural Field Experiment," NBER Working Papers 23229, National Bureau of Economic Research, Inc.
    8. Gächter, Simon & Gerhards, Leonie & Nosenzo, Daniele, 2017. "The importance of peers for compliance with norms of fair sharing," European Economic Review, Elsevier, vol. 97(C), pages 72-86.
    9. Cristina Bicchieri & Eugen Dimant & Simon Gaechter & Daniele Nosenzo, 2020. "Observability, Social Proximity, and the Erosion of Norm Compliance," CESifo Working Paper Series 8212, CESifo.
    10. Bland, James & Nikiforakis, Nikos, 2015. "Coordination with third-party externalities," European Economic Review, Elsevier, vol. 80(C), pages 1-15.
    11. Amy K. Choy & John R. Hamman & Ronald R. King & Roberto A. Weber, 2016. "Delegated bargaining in a competitive agent market: an experimental study," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 2(1), pages 22-35, May.
    12. Blacklow, Paul & Sibly, Hugh & Corman, Amy Beth, 2021. "Do we prefer praise from acquaintances or strangers? An experiment on esteem seeking in one-shot versus repeated interactions," Working Papers 2021-08, University of Tasmania, Tasmanian School of Business and Economics.
    13. Björn Bartling & Tobias Gesche & Nick Netzer, 2017. "Does the absence of human sellers bias bidding behavior in auction experiments?," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(1), pages 44-61, July.
    14. Loretta Mastroeni & Maurizio Naldi & Pierluigi Vellucci, 2023. "Personal Finance Decisions with Untruthful Advisors: An Agent-Based Model," Computational Economics, Springer;Society for Computational Economics, vol. 61(4), pages 1477-1522, April.
    15. Lehr, Alex & Vyrastekova, Jana & Akkerman, Agnes & Torenvlied, René, 2016. "Spillovers and conflict in wage bargaining: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 63(C), pages 59-68.
    16. Cason, Timothy N. & Gangadharan, Lata & Grossman, Philip J., 2022. "Gender, beliefs, and coordination with externalities," Journal of Public Economics, Elsevier, vol. 214(C).
    17. Benndorf, Volker & Rau, Holger A. & Sölch, Christian, 2019. "Minimizing learning in repeated real-effort tasks," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 239-248.
    18. Chiara Nardi, 2018. "Play Versus Strategy Method: Behavior and the Role of Emotions in the Ultimatum Game," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(1), pages 91-106, March.
    19. Rojas Valdes, Ruben I. & Lin Lawell, C.-Y. Cynthia & Taylor, J. Edward, 2017. "The Dynamic Migration Game: A Structural Econometric Model and Application to Rural Mexico," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259184, Agricultural and Applied Economics Association.
    20. Benndorf, Volker & Rau, Holger A. & Sölch, Christian, 2018. "Minimizing learning behavior in repeated real-effort tasks," University of Göttingen Working Papers in Economics 343, University of Goettingen, Department of Economics.
    21. James Andreoni & Nikos Nikiforakis & Jan Stoop, 2021. "Higher socioeconomic status does not predict decreased prosocial behavior in a field experiment," Nature Communications, Nature, vol. 12(1), pages 1-8, December.

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    More about this item

    Keywords

    social comparisons; ultimatum bargaining; laboratory experiments; self-serving bias; real-e¤ort;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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