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What can facilitate cooperation: Fairness, ineaulity aversion, punishment, norms or trust?

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  • Urs Steiner Brandt

    ()
    (Department of Environmental and Business Economics, University of Southern Denmark)

Abstract

Almost all economic and public choice models assume that all people are exclusively pursuing their own material self-interests and do not care about "social" goals per se. Several (laboratory) experiments address the question of the general validity of this assumption. A consistent conclusion emerges that a significant number of people deviate from the assumption of selfish rational behaviour; this conclusion is robust with respect to the design of the experiments. Therefore, public choice comes with a price: the conclusions are based on the stylized stereotype of economic man, an assumption that is not fully satisfied. The purpose of this paper is to show how to incorporate otherregarding preferences into an otherwise traditional utility approach without losing predicting power or compromising the rationality assumption. On the contrary, since other-regarding preferences are based on observed behaviour, the predicting power increases; this is demonstrated at the end of this paper, where it is shown how other-regarding preferences can explain the existence and persistence of a welfare state and why people might act sustainably.

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Bibliographic Info

Paper provided by University of Southern Denmark, Department of Environmental and Business Economics in its series Working Papers with number 80/08.

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Length: 56 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:sdk:wpaper:80

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  1. James Andreoni & William T. harbaugh & Lise Vesterlund, 2002. "The Carrot or the Stick: Rewards, Punishments, and Cooperation," University of Oregon Economics Department Working Papers 2002-01, University of Oregon Economics Department, revised 20 Aug 2002.
  2. Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September.
  3. Ernst Fehr & Simon G�chter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
  4. Hill, Sarah A. & Neilson, William, 2007. "Inequality aversion and diminishing sensitivity," Journal of Economic Psychology, Elsevier, vol. 28(2), pages 143-153, April.
  5. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  6. Ernst Fehr & Urs Fischbacher, 2004. "Social norms and human cooperation," Macroeconomics 0409026, EconWPA.
  7. Ivar Kolstad, 2003. "The evolution of social norms," CMI Working Papers WP 2003:1, CMI (Chr. Michelsen Institute), Bergen, Norway.
  8. Elinor Ostrom, 2000. "Collective Action and the Evolution of Social Norms," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 137-158, Summer.
  9. Daniel Houser & Robert Kurzban, 2002. "Revisiting Kindness and Confusion in Public Goods Experiments," American Economic Review, American Economic Association, vol. 92(4), pages 1062-1069, September.
  10. Abbink, Klaus & Bolton, Gary E. & Sadrieh, Abdolkarim & Tang, Fang-Fang, 2001. "Adaptive Learning versus Punishment in Ultimatum Bargaining," Games and Economic Behavior, Elsevier, vol. 37(1), pages 1-25, October.
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