Social ties in economics: experiments and theory – TIES

We study the impact of various degrees of information about the interaction partners by using controlled laboratory experiments. All experiments were incentivized in the sense that participants were in an abstract economic interaction with others and were paid out their earnings from the interaction at the end of the study. Laboratory experiments enable us to observe in a controlled environment how participants react to specific information about the other. Across the different studies we vary the amount of information available about partners. We also used different experimental paradigms (games) to study different aspects of social interactions. One variant, called the trust game, is structured such as to evaluate a participants beliefs about the trustworthiness of others. Another game, called the public good game, resembles a situation in which all participants would be better of if everybody would cooperate with others, however every individual has an individual incentive to free ride on others. This is an abstract model of many real world dilemmas encountered for example between farmers jointly investing in a common good.

i. Among others we show that reading trustworthiness off the faces of strangers is a genuine and effortless ability, possessed in equal amount by people of all cognitive capacities. This ability become increasingly accurate during adolesence. Building spontanuous trusting relationships to others is therefore not random but based on some valid signals.
ii. For participants that know each other from outside the laboratory we show that farmers that face real life free riding problems in their community, expect similar free riding behavior in unrelated environments. Concerning the impact of ruptures in the social network we further studied low intensity armed conflict in Colombia. We focused on two types of regions: high net out-flow and high net in-flow. Public good contributions are significantly higher in regions with high net-changes. We find that the effect is especially strong for women in net out-flow areas; usually the most affected if male family members are forcibly displaced.
iii. For the case of coordination games we further find that smaller and more salient in-groups lead to significantly more group beneficial choices. The same effect is observed for players that report high values of their subjective social ties. We provide a detailed game theoretical analysis of these types of games while considering various types of players, i.e., self-interest maximizing, inequity averse, and fair agents. Specifically we present an alternative hypothesis that relies on the concept of team reasoning.

Results from this project have provided important insights into how intuitively trusting links are formed based on seeing others, how previous socio-economic experiences influence beliefs about others and own choices in an anonymous laboratory interaction, and have given us new insights into the gradual nature of social connectedness. The project has lead to the development of multiple new research projects, for example a project on the importance of genetic relatedness (joint with Gwenael Kaminski and Jean-Francois Bonnefon). It has also lead to a new field project (joint with Cesar Mantilla and Pepita Miquel-Florensa) on the ingroup interactions of fishermen in Colombia.

Results from the present research project have been presented at a number of national and international conferences (e.g. Economic Science Association ; International Meeting of Experimental and Behavioral Social Science ; Norms, Actions and Games ; ...). Four papers resulting from this project have been published in international peer reviewed journals. Two additional papers are currently undergoing peer-review. Further one working paper is currently being prepared for submission and two chapters have been contributed to edited volumes on behavioral economics.

When analyzing social dilemmas in economics it is often assumed that interactions are anonymous and not repeated. In many social interactions the interaction partner is however known. Clearly this information will influence decisions and choices when interacting with this partner. So far economists have mostly focused on the information value that might be transmitted when the interaction partner is known. However other factors as affective ties and feelings with respect to the partner might be even more influential. In this research program we wish to investigate the impact of such social ties on decisions in economic interactions. We will focus on the factors creating such ties and we will investigate the impact of existing social ties. Results from the first line of research will enable us to better understand the creation of groups. Research has shown that norms, expectations and motivations are strongly influenced by the reference group we have in mind. Understanding the mechanisms leading to the creation of ties will therefore enable us to adapt institutions to enforce socially desirable norms and behaviors. Results from the second line of research will enable a better understanding of situations of competition, bargaining and social dilemmas for partners sharing social ties. Examples include time allocation and consumption behavior of households and incentive schemes in work environments.

The proposed research program will investigate these questions both by using controlled laboratory experiments and by theoretical analysis. All experiments will be incentivized in the sense that participants will participate in an economic interaction with others and will be paid out their earnings from the interaction at the end of the study. Laboratory experiments enable us to observe in a controlled environment which factors induce participants to generate social ties to others. Successively we can increase the amount of information available about the partner and observe behavioral changes. Also we can observe how initially random group will evolve group identities through seemingly random markers. Economic experiments will be further used to observe the impact of existing social ties on behavior. For this groups of participants will be recruited that already share a social tie. Some experiments will focus on families and couples while others will investigate behavior among friends and colleagues. While some of these studies will therefore be conducted in economic computer laboratories situated in universities it will be necessary for some of the studies to conduct tests in the 'field'. Specifically experiments will be conducted in the work environment of participants.

The affective links between participants in economic games have received increased attention in recent years. A number of experiments have been conducted investigating the role of emotions in social dilemmas in general, however so far few studies have focused on the specific social ties involved. This project brings together a group of young researchers from France, the Netherlands and the US that have all been previously involved in research projects related to one or the other important ingredient of this proposal. They will bring together expertise concerning experimental economics, affective sciences, cognitive sciences, social networks, reputation building, family decision making and incentives. Most of the involved group members have been working together and have received training in experimental economics. Their previous work resulted in presentations and peer-reviewed publications in international outlets of some of the first experimental results concerning social emotions and social ties in dilemma games and experiments on network structure and incentives.