IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v101y2011i6p2562-89.html
   My bibliography  Save this article

The Potential of Social Identity for Equilibrium Selection

Author

Listed:
  • Roy Chen
  • Yan Chen

Abstract

When does a common group identity improve efficiency in coordination games? To answer this question, we propose a group-contingent social preference model and derive conditions under which social identity changes equilibrium selection. We test our predictions in the minimum-effort game in the laboratory under parameter configurations which lead to an inefficient low-effort equilibrium for subjects with no group identity. For those with a salient group identity, consistent with our theory, we find that learning leads to ingroup coordination to the efficient high-effort equilibrium. Additionally, our theoretical framework reconciles findings from a number of coordination game experiments. (JEL C71, C91, D71)

Suggested Citation

  • Roy Chen & Yan Chen, 2011. "The Potential of Social Identity for Equilibrium Selection," American Economic Review, American Economic Association, vol. 101(6), pages 2562-2589, October.
  • Handle: RePEc:aea:aecrev:v:101:y:2011:i:6:p:2562-89
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.6.2562
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    File URL: http://www.aeaweb.org/aer/data/oct2011/20091062_data.zip
    File Function: dataset accompanying article
    Download Restriction: no
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
    2. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
    3. Crawford, Vincent P, 1995. "Adaptive Dynamics in Coordination Games," Econometrica, Econometric Society, vol. 63(1), pages 103-143, January.
    4. Basu, Kaushik, 2006. "Participatory Equity, Identity, and Productivity: Policy Implications for Promoting Development," Working Papers 06-06, Cornell University, Center for Analytic Economics.
    5. David K. Levine, 1998. "Modeling Altruism and Spitefulness in Experiment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 593-622, July.
    6. Roberto A. Weber, 2006. "Managing Growth to Achieve Efficient Coordination in Large Groups," American Economic Review, American Economic Association, vol. 96(1), pages 114-126, March.
    7. Cooper, David J. & Stockman, Carol Kraker, 2002. "Fairness and learning: an experimental examination," Games and Economic Behavior, Elsevier, vol. 41(1), pages 26-45, October.
    8. McLeish, Kendra N. & Oxoby, Robert J., 2007. "Identity, Cooperation, and Punishment," IZA Discussion Papers 2572, Institute of Labor Economics (IZA).
    9. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
    10. B. Curtis Eaton & Mukesh Eswaran & Robert J. Oxoby, 2011. "Us and `Them': the origin of identity, and its economic implications," Canadian Journal of Economics, Canadian Economics Association, vol. 44(3), pages 719-748, August.
    11. George A. Akerlof & Rachel E. Kranton, 2011. "Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being," Economics Books, Princeton University Press, edition 1, number 9108.
    12. Eckel, Catherine C. & Grossman, Philip J., 2005. "Managing diversity by creating team identity," Journal of Economic Behavior & Organization, Elsevier, vol. 58(3), pages 371-392, November.
    13. 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.
    14. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    15. Roy Chen & Yan Chen, 2011. "The Potential of Social Identity for Equilibrium Selection," American Economic Review, American Economic Association, vol. 101(6), pages 2562-2589, October.
    16. Crawford, Vincent & Broseta, Bruno, 1998. "What Price Coordination? The Efficiency-Enhancing Effect of Auctioning the Right to Play," American Economic Review, American Economic Association, vol. 88(1), pages 198-225, March.
    17. Drew Fudenberg & David K. Levine, 1998. "The Theory of Learning in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061945.
    18. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arno Riedl & Ingrid M. T. Rohde & Martin Strobel, 2016. "Efficient Coordination in Weakest-Link Games," Review of Economic Studies, Oxford University Press, vol. 83(2), pages 737-767.
    2. Maoliang Ye & Jie Zheng & Plamen Nikolov & Sam Asher, 2020. "One Step at a Time: Does Gradualism Build Coordination?," Management Science, INFORMS, vol. 66(1), pages 113-129, January.
    3. V. P. Crawford., 2014. "Boundedly Rational versus Optimization-Based Models of Strategic Thinking and Learning in Games," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
    4. Jacob K. Goeree & Charles A. Holt, 2001. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," American Economic Review, American Economic Association, vol. 91(5), pages 1402-1422, December.
    5. Olivier Armantier, 2006. "Do Wealth Differences Affect Fairness Considerations?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 391-429, May.
    6. Bicskei, Marianna & Lankau, Matthias & Bizer, Kilian, 2016. "Negative reciprocity and its relation to anger-like emotions in identity-homogeneous and -heterogeneous groups," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 17-34.
    7. Charness, Gary & Naef, Michael & Sontuoso, Alessandro, 2019. "Opportunistic conformism," Journal of Economic Theory, Elsevier, vol. 180(C), pages 100-134.
    8. Yan Chen & Sherry Xin Li, 2009. "Group Identity and Social Preferences," American Economic Review, American Economic Association, vol. 99(1), pages 431-457, March.
    9. James Andreoni & Marco Castillo & Ragan Petrie, 2009. "Revealing Preferences for Fairness in Ultimatum Bargaining," Korean Economic Review, Korean Economic Association, vol. 25, pages 35-63.
    10. Fischbacher, Urs & Fong, Christina M. & Fehr, Ernst, 2009. "Fairness, errors and the power of competition," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 527-545, October.
    11. Sven Fischer, 2005. "Inequality Aversion in Ultimatum Games with Asymmetric Conflict Payoffs - A Theoretical and Experimental Analysis -," Papers on Strategic Interaction 2005-36, Max Planck Institute of Economics, Strategic Interaction Group.
    12. Hanaki, Nobuyuki & Sethi, Rajiv & Erev, Ido & Peterhansl, Alexander, 2005. "Learning strategies," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 523-542, April.
    13. Morita, Hodaka & Servátka, Maroš, 2013. "Group identity and relation-specific investment: An experimental investigation," European Economic Review, Elsevier, vol. 58(C), pages 95-109.
    14. Quement, Mark T. Le & Marcin, Isabel, 2020. "Communication and voting in heterogeneous committees: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 449-468.
    15. Urs Fischbacher & Simeon Schudy, 2014. "Reciprocity and resistance to comprehensive reform," Public Choice, Springer, vol. 160(3), pages 411-428, September.
    16. Dickinson, David L. & Masclet, David & Peterle, Emmanuel, 2018. "Discrimination as favoritism: The private benefits and social costs of in-group favoritism in an experimental labor market," European Economic Review, Elsevier, vol. 104(C), pages 220-236.
    17. Engelmann, Dirk & Fischbacher, Urs, 2009. "Indirect reciprocity and strategic reputation building in an experimental helping game," Games and Economic Behavior, Elsevier, vol. 67(2), pages 399-407, November.
    18. Ulrike Malmendier & Klaus M. Schmidt, 2017. "You Owe Me," American Economic Review, American Economic Association, vol. 107(2), pages 493-526, February.
    19. Dato, Simon & Feess, Eberhard & Nieken, Petra, 2019. "Lying and reciprocity," Games and Economic Behavior, Elsevier, vol. 118(C), pages 193-218.
    20. Sanjeev Goyal & Penélope Hernández & Guillem Martínez-Cánovas & Frédéric Moisan & Manuel Muñoz-Herrera & Angel Sánchez, 2021. "Integration and diversity," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 387-413, June.
      • Goyal, S. & Hernández, P. & Muñnez-Cánovasz, G. & Moisan, F. & Muñoz-Herrera, M. & Sánchez, A., 2017. "Integration and Diversity," Cambridge Working Papers in Economics 1721, Faculty of Economics, University of Cambridge.
      • Sanjeev Goyal & Penélope Hernández & Guillem Martínez-Cánovas & Frederic Moisan & Manuel Muñoz-Herrera & Angel Sánchez, 2020. "Integration and Diversity," Post-Print hal-03188210, HAL.
      • Sanjeev Goyal & Penelope Hernandez & Guillem Martinez-Canovas & Frederic Moisan & Manuel Munoz-Herrera & Angel Sanchez, 2019. "Integration and Diversity," Working Papers 20190025, New York University Abu Dhabi, Department of Social Science, revised Sep 2020.
      • Sanjeev Goyal & Pénélope Hernández & Guillem Martínez-Cánovas & Frédéric Moisan & Manuel Muñoz-Herrera & Ángel Sánchez, 2021. "Integration and diversity," Post-Print halshs-03051962, HAL.

    More about this item

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. The Potential of Social Identity for Equilibrium Selection (AER 2011) in ReplicationWiki

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:101:y:2011:i:6:p:2562-89. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.