Group Uncertainty and Social Preferences

This paper studies the effect of uncertainty in group identity on social preferences. We run a laboratory experiment to investigate the uncertainty choice and its impact on social preferences. Firstly, we have replicated the result of the literature on in-group favouritism and out-group discrimination in experimental works in psychology and economics. Secondly, we find that only 60 percent of participants are willing to know the identity of their matched counterparts. The participants who decide to know the identity of their counterparts are 64 percent more likely to choose social- welfare-maximising outcome but show 27 percent decrease in charity concerns toward an in-group member. Moreover, the subjects are less likely to reward and more likely to punish when their counterpart is an in-group member. The participants who decide not to know the identity of their counterpart are more reciprocal than participants who choose to know the identity of their counterpart. They are more likely to reward and less likely to punish their counterparts.