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Prof. Andrew Schotter
New York University, USA

Authors: Luis Cabral, Erkut Y. Ozbay, and Andrew Schotter

Abstract: We experimentally test a repeated veto game: in each of an infinite number of periods, Nature generates a pair of payoffs, one for each player. Although the sum of the players’ payoffs is positive, one of the players may receive a negative payoff. Players simultaneously decide whether to approve such a proposal. If either of the players vetoes the proposal, both players get zero; otherwise, they receive the value generated by Nature. In this context, we devise an experiment to distinguish between alternative explanations of generous behavior (accepting negative payoffs): altruism and other-regarding preferences, intrinsic backward-looking reciprocity (reciprocal kindness), and instrumental forward-looking (or equilibrium) reciprocity. Our results are broadly consistent with the hypothesis that observed sacrifices are motivated by equilibrium selfish, forward-looking reciprocal behavior. For example, of the 132 subjects, 74.2% can be categorized strictly selfish in their motivation, 19.2% as having some altruistic or other regarding concerns, and 3.7% as taking kindness considerations into account.

Full Text: “Intrinsic and Instrumental Reciprocity: An Experimental Study”