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Social Comparisons as a device for cooperation in simultaneous-move games

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  • Felix Munoz-Garcia

    ()
    (School of Economic Sciences, Washington State University)

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    Abstract

    This paper analyzes the effects of players' relative comparisons in complete information simultaneous-move games. In particular, every individual is assumed to evaluate the kindness she infers from other players'choices by comparing these choices with respect to a given refer- ence level. Specifically, this paper identifies under what conditions the introduction of relative comparisons leads players to be more cooperative than in standard game-theoretic models. I show that this result holds under certain conditions on the specific reference point that players use in their relative comparisons, and on whether players'relative comparisons leads them to regard each others' actions as more strategic complementary or substitutable. The model is then applied to different examples in public good games which enhance the intuition behind the results. Finally, I show that some existing models in the literature of intentions-based reciprocity and social status acquisition can be rationalized as special cases.

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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/Munoz/Reference-points-simultaneous-move-games.pdf
    File Function: First version, 2008
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    Bibliographic Info

    Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2008-11.

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    Length: 24 pages
    Date of creation: Aug 2008
    Date of revision:
    Handle: RePEc:wsu:wpaper:munoz-1

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    Related research

    Keywords: Relative comparisons; Reference points; Simultaneous-move games; Kindness; Strategic complementarities.;

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    1. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-24, December.
    2. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
    3. Dufwenberg, M. & Kirchsteiger, G., 1998. "A Theory of Sequential Reciprocity," Discussion Paper 1998-37, Tilburg University, Center for Economic Research.
    4. Koszegi, Botond & Rabin, Matthew, 2004. "A Model of Reference-Dependent Preferences," Department of Economics, Working Paper Series qt0w82b6nm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    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. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
    7. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
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