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Abstract
This paper investigates the importance of concerns about intentions and outcomes in a sequential prisoner’s dilemma game with nature. In the game, there is a chance that the first mover’s choice is reversed. This allows the separation of intended actions from the resulting outcomes. Equilibrium predictions from theoretical models of fairness are tested experimentally by varying the chance the first mover’s choice is reversed and whether the second mover observes the first mover’s choice. The results show that second mover cooperation is higher when the first mover has little control over their choice and when the second mover is not told what the first mover chose. While subject behavior is consistent with concerns for both intentions and outcomes, the results indicate that these concerns work in ways not predicted by current theoretical models. In addition, I find that psychometric measures of empathic concern and perspective taking are correlated with second mover cooperation and provide potential explanations for the experimental results.
Highlights
Experimental evidence indicates that people often deviate from maximizing their own monetary payoff
Second movers cooperated less often when the first movers choice was known compared to uncertain. This suggests that knowledge of the first movers choice mattered contrary to what is predicted by outcome-based fairness models
The restriction allows a between subjects analysis, and the results suggest that second movers cooperated more often in the Uncertain treatment and Low Control condition
Summary
Experimental evidence indicates that people often deviate from maximizing their own monetary payoff. If individuals care about both reciprocity and inequity aversion, there exists an additional equilibrium depending on the relative strength of the two concerns These predictions are tested experimentally by varying the chance the first mover’s choice is reversed and whether the second mover observes the first mover’s choice. Using the sequential prisoner’s dilemma, Dhaene and Bouckaert [18] find evidence that conditional cooperation by second movers matches the theoretical predictions from the reciprocity model of [8] while Blanco et al [19] show that individual measures of inequity aversion [6] can predict second mover behavior. Potential changes in behavior between these two treatments can shed light on the importance of observing others’ intentions
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