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1 Deeds rather than Omssons How Intended Consequences Provoke Negatve Recprocty Manuel Schubert Dskussonsbetrag Nr. V Volkswrtschaftlche Rehe ISSN PASSAUER DISKUSSIONSPAPIERE

2 Herausgeber: De Gruppe der volkswrtschaftlchen Professoren der Wrtschaftswssenschaftlchen Fakultät der Unverstät Passau Passau Deeds rather than Omssons - How Intended Consequences Provoke Negatve Recprocty Manuel Schubert Dskussonsbetrag Nr. V Volkswrtschaftlche Rehe ISSN Adresse des Autors: Dpl.-Kfm. Manuel Schubert B.A. Wssenschaftlcher Mtarbeter am Lehrstuhl für Volkswrtschaftstheore Wrtschaftswssenschaftlche Fakultät Unverstät Passau Passau Telefon: (0851) Telefax: (0851) E-Mal: Manuel.Schubert@un-passau.de Für den Inhalt der Passauer Dskussonspapere st der ewelge Autor verantwortlch. Es wrd gebeten, sch mt Anregungen und Krtk drekt an den Autor zu wenden.

3 Deeds rather than Omssons - How Intended Consequences Provoke Negatve Recprocty * Manuel Schubert 6/18/2012 Abstract Intenton-based models of recprocty argue that people assess kndness by measurng the ntended consequences of actual behavor (deeds) aganst foregone payoffs resultng from unchosen alternatves (omssons). Whle the effects of omssons have been ntensvely studed n recent years, less has been done wth respect to the mpact of deeds on recprocaton. I employ a novel game that alters the ntended consequences behnd actual behavor at constant levels of unchosen alternatves and realzed payoffs. Aggregate results suggest that ntended consequences only weakly matter for negatve recprocty. I fnd men to abstan from retalaton when others ntend to mldly harm them. Women, however, seem to be largely nvarant to ntended consequences of actual behavor. Keywords: Intentons, recprocty, kndness, gender JEL-classfcaton: D63, C78, C91 * I am ndebted to Johann Graf Lambsdorff, Ana Ullrch, and Andreas Ncklsch for provdng encouragement and valuable comments. I would also lke to thank the partcpants at the GfeW 2011 meetng n Nuremberg, the 4 th Maastrcht Behavoral and Expermental Economcs Symposum 2011, and the brown bag semnar at Passau Unversty. Manuel Schubert s research assstant at the Unversty of Passau, Innstrasse 27, D Passau, Germany (manuel.schubert@un-passau.de).

4 1. Introducton Imagne yourself readng the newspaper on a park bench when suddenly a stone shoots by almost httng your forehead. Consderng the sze of the stone, you are lucky to survve the attack. You turn around and espy the culprt behnd a nearby tree. You roll up your sleeves, ready to gve hm somethng to thnk about. But why exactly are you upset? After all, you have not been nured. What stmulates your desre for revenge? Intenton-based models of recprocty provde an answer to ths queston. In hs poneerng work, Rabn (1993) ncorporates preferences for recprocty nto a model of socal utlty. 1 Such preferences gude us to reward acts of kndness (postve recprocty) and punsh those who treat us unkndly (negatve recprocty). The core trgger of recprocaton s perceved kndness. If someone wants to be nce to us, e.g. decdes to send us flowers, he s knd to us. In that case, we may be wllng to recprocate hs gft. On the other hand, f someone wants to harm us, e.g. throws stones at us, he s unknd and we may seek for revenge. In more general terms, recprocal preferences presume a player s utlty to ncrease by respondng to another player s kndness n an equal manner. But how to determne whether an acton s knd or unknd? What are the drvers of kndness? Recprocty models suggest that perceved kndness s derved by measurng the ntended consequences of actual behavor (deed) aganst the foregone payoffs n the unchosen alternatve (omsson). The archetypcal recprocty model refers to an actve player as beng knd, whenever the ntended consequences of hs acton leave the nactve player better off than the consequences of the unchosen alternatve. On the other hand, f the ntended consequences of hs actual choce leave the nactve player worse off than the unchosen alternatve, the actve player s unknd. Prevous expermental studes have largely been devoted to the mpact of foregone payoffs (e.g. Brandts and Solà 2001; Falk et al. 2003; Bolton and Ockenfels 2005; or Sutter 2007). Fndngs broadly reveal that unchosen alternatves matter for kndness evaluatons. We seem to consder the stuatonal framework, e.g. f someone was forced nto harmng us or f we were harmed delberately (Falk et al. 2003; Schubert and Lambsdorff 2012). However, omssons are ust one element of kndness percepton and therefore sometmes fal to explan our desre for recprocaton. In the ntroductory story, for nstance, both the foregone consequences and the realzed consequences are dentcal - we are not harmed. In ths case, the omtted acton cannot explan our negatve sentment. It s rather the ntended 1 Important extensons and mprovements later came from Dufwenberg and Krchsteger (2004), Falk and Fschbacher (2006), Cox et al. (2007), Stanca et al. (2009), or Seebald (2010). I refer to ths class of approaches as (ntenton-based) models of recprocty. 1

5 consequence behnd actual behavor that nurtures our thrst for revenge. Ths study tests ths conecture n a laboratory experment. It nvestgates the effect of ntended consequences on negatve recprocty. Addressng the drvers of kndness s not only mportant for testng prevalng models of recprocty. Researchers frequently observe ambguous gender dfferences n ultmatum and trust games (e.g. Eckel and Grossman 2001; Solnck 2001; Cox 2002). Some authors argue these nconsstences can be explaned by assumng genders to have dfferent preferences for recprocty (e.g. Cox 2002; Lambsdorff and Frank 2011). Analyzng how ntended consequences trgger punshment may also shed emprcal lght on ths debate. I employ a novel game that focuses on the mpact of deeds rather than omssons whle controllng for a subect s gender. The desgn compasses three treatments of a modfed mn ultmatum game. In each treatment a frst mover can ether offer an equal splt or flp a con to determne the actual payoff allocaton. In the frst treatment, flppng the con s mldly unknd n terms of ntended payoff allocatons. In the second treatment, t s moderately unknd, whereas n the thrd treatment flppng the con s strongly unknd toward the responder. Comparng responses at constant levels of realzed payoffs and unchosen alternatves, the results provde mxed evdence for the dea that kndness evaluatons ncorporate ntended consequences. Male subects appear to react to varatons n ntended consequences whle female players seem to be rather nvarant. The remander of ths paper s organzed as follows: secton 2 brefly explans a formal noton of kndness. Secton 3 summarzes prevous expermental evdence. The expermental desgn and procedures are presented n sectons 4 and 5. The results are llustrated n secton 6. The study ends wth a dscusson and some concludng remarks n sectons 7 and A smple model of kndness percepton Ths paper s not about a horse race between the promnent models of recprocty (Rabn 1993, Dufwenberg and Krchsteger 2004, Falk and Fschbacher 2006, Cox et al. 2007). Therefore, ths secton brefly presents an archetypcal model of kndness and does not dscuss the foundatons of each model n detal. In order to demonstrate the general dea behnd kndness evaluatons, frst consder a twostage game n whch a frst mover, player, can decde between two payoff allocatons - allocaton A wth ( A A, ) and allocaton B wth ( B B, ). The second mover, player, can ether ncrease or decrease the frst mover s payoffs. For the sake of smplcty, let us assume that these adustments are free of costs to player. 2

6 Socal utlty for player s then derved by realzed payoffs,, and by recprocatng to the other player s kndness n an equal manner: U = + K K (1) Sgn and absolute value of ncomng kndness, K, determne the type and extent of outgong kndness, K. The hgher the absolute values of ncomng kndness the stronger the recprocal response. By equaton (1) t also becomes clear that ncomng kndness s postvely recprocated, whereas ncomng unkndness s negatvely recprocated. Player determnes ncomng kndness by measurng the payoffs player has gven to hm (player ) aganst player s alternatve payoffs. More generally, archetypcal kndness can be defned as: K = - (2) deed omsson deed The frst element,, captures the mpact of ntended consequences on player s kndness. It s the payoff that player ntends to gve to player n hs actual choce. 2 The second term, omsson, represents player s benchmark for far behavor. Ths s the payoff that could have got f player had chosen the alternatve allocaton. Kndness s measured by the dfference between the ntended and the foregone payoffs. If player selects an allocaton that gves more to than the alternatve, he s knd to player ( K > 0 ). On the other hand, f the actual allocaton yelds less than the alternatve allocaton, player s unknd ( K < 0 ). 3 As a result, the actual level of (un-)kndness can be ncreased by ether 1) ncreasng (reduc- deed ng) the ntended consequences behnd actual behavor,, or 2) reducng (ncreasng) the omsson payoff n the omtted alternatve,. 2 In models based on psychologcal game theory the ntended consequences actually depend on s belefs about s expectatons (Rabn 1993; Dufwenberg and Krchsteger 2004; Falk and Fschbacher 2006). In ths paper, I prefer a more tractable noton of ntended consequences. I follow Cox et al. (2007: 22) and refer to as the expected maxmum payoff the second mover can guarantee hmself gven the frst mover s choce. 3 Defntely, nterpersonal comparsons may also matter for perceved kndness (see e.g. Falk and Fschbacher 2006; Schubert and Lambsdorff 2012). However, accountng for one s costs and other s benefts does not alter the key assumptons underlyng recprocty theory that kndness s a functon of the ntended consequences of actual behavor and unchosen alternatves. Therefore, nterpersonal comparsons are neglected n ths study. deed 3

7 3. Prevous expermental evdence A seres of expermental studes has been devoted to nvestgate the mpact of unchosen alternatves on recprocaton. Partcular attenton has been gven to behavor n mn ultmatum games. As depcted n fgure 1, after player has decded on the allocaton, player can agree or dsagree to the allocaton. If he accepts the allocaton, payoffs are dsbursed accordngly. If player reects, both players get zero payoffs. Fgure 1: mn ultmatum game player accept ( A A, ) player A B reect accept ( 0,0) ( B B, ) player reect ( 0,0) In order to assess the mpact of unchosen alternatves, many authors compare reecton rates to constant allocatons ( A A, ) across dfferent pars of alternatve payoffs ( B B, ) example, n Brandts and Solà (2001) the allocaton A ( A A, ). For s fxed at (320,80). Thus, whenever player selects allocaton A, he ntends to gve player 80 currency unts ( deed =80). In one treatment, the alternatve allocaton B ( B B, ) yelds a (350,50) splt. Ac- omsson cordngly, f player proposes allocaton A the foregone payoff for player s =50. The dfference of deed omsson K = - =80-50=30 suggests that player acts kndly when proposng allocaton A. In a dfferent treatment, the alternatve allocaton B yelds a (200,200) omsson splt. Hence, the share of player n the unchosen allocaton now ncreases to =200. Proposng the (320,80) splt becomes unknd ( K =200-80=-120). In lne wth ths asserton, the authors observe substantal dfferences n reecton rates across treatments. Whle n the frst treatment only 3 percent of all (320,80) splts are reected, reecton rates ncrease to 13 percent n the second treatment. Table 1 summarzes further fndngs of varous studes that have assessed the role of omssons. Each study s represented by two treatments coverng both knd and unknd behavor. 4

8 study Table 1: responses n omsson experments kndness category deed omsson K reecton rates Brandts and Solà (2001) knd unknd Falk et al. (2003) knd unknd Bolton and Ockenfels (2005) knd unknd Sutter (2007) knd unknd Although there s some dsperson, recprocaton clearly vares wth kndness categores. Knd allocatons are less often reected than unknd ones. Also note that these dfferences wthn studes are solely nduced by varatons n the unchosen alternatves. Omssons, however, are ust one element of kndness percepton. Although we stll lack an explct test on the ntended consequences on recprocaton, some studes managed to alter both drvers of kndness smultaneously. For example, Blount (1995) compares reecton rates n regular ultmatum games aganst reecton rates to dentcal proposals whch were determned by a random mechansm. She fnds punshment rates to declne when random devces act as frst movers. However, gven that the frst mover has no decsve power n the second treatment, hs deeds and omssons are uncontrolled and the other player can nether nfer ntended consequences nor foregone payoffs. More recent studes focus on dsconnectng ntended and realzed outcomes by lotteres. In these games, player has only partal control over actual payoffs. He can choose between strateges assgnng specfc probablty profles over a set of realzed outcomes. The expected payoffs lnked to s acton then serve as proxes for the ntended consequences. Charness and Levne (2007), for example, study a modfed gft exchange game n whch frms (player ) can ether choose to pay a hgh wage of 8 currency unts ( wage ( deed deed =8) or a low =4) to a worker (player ). After the frm s move a con flp determnes the wage condton whch s ether good (transferrng 2 currency unts more from the frm to the worker) or bad (transferrng 2 currency unts less from the frm to the worker). In the last stage, the worker can ether reward or punsh the frm. The desgn ncely controls for confounds wth realzed wages. Hgh wages under bad wage condtons and low wages under good wage condtons are dentcal n sze ( =6). Accordng to the kndness functon n equaton (2), pay- ng hgh wages whle dsregardng payng low wages s knd ( K =8-4=4) and payng low 5

9 wages whle neglectng hgh wages s unknd ( K =4-8=-4). Once agan, response rates are well n lne wth kndness categores. As can be seen n table 2, frms are more often punshed for unknd wages (19 percent) than for knd ones (3 percent). study Table 2: responses n lottery experments kndness category deed omsson K response measure Charness and Levne (2007) knd unknd Cushman et al. (2009) knd unknd Schächtele et al. (2011) knd unknd Note: For Charness and Levne (2007) the response measure s punshment rates. For the next studes t s the mean adustment made to player s payoffs. Cushman et al. (2009) allowed player to roll ether a selfsh, a far, or a generous de to determne the proposed allocaton. The correspondng expected payoffs are (7.5,2.5) when rollng the selfsh de, (5,5) when rollng the far de, and (2.5,7.5) when rollng the generous de. After nature has moved and determned the realzed payoff allocaton, player can ncrease or decrease s payoffs. Dsregardng the far de for llustratve reasons, rollng the selfsh de s unknd ( K = =-5) whle rollng the generous de s knd toward player ( K = =5). The results agan match wth predctons from kndness categores. When dsadvantageous allocatons are realzed, punshment after rollng the selfsh de (mean adustment of -3) s hgher than punshment after rollng the generous de (mean adustment of - 1). Schächtele et al. (2011) have replcated Cushman et al. (2009) s desgn wth some mnor changes. Ther fndngs corroborate Cushman et al. s earler results. Rollng the unknd selfsh de generates mean adustments n s payoffs of -9 compared to lower mean adustments of -3 when rollng the far de. The lottery studes largely confrm the relevance of kndness percepton for general behavor. However, they alter the ntended and unchosen payoffs smultaneously. Every tme player decdes to roll the selfsh de, he also abstans from rollng other dce. Hence, f selfsh proposals are reected, we stll do not know whether ths s due to the selectng the selfsh de or not selectng the generous de. We can not dstngush whether dfferences n responses are motvated by the ntended consequences behnd actual behavor or by the foregone payoffs n an unchosen alternatve. 6

10 Intended rather than foregone payoffs may not only be mportant wth respect to testng a key element of recprocty models. There also exsts some evdence that kndness may trgger dfferent recprocal responses dependng on a subect s gender. As Camerer (2003: 64) argues women are generally seen to subordnate themselves to hgher goals lke harmony, whle men appear to be more aggressve n ther behavor. The studes of Eckel and Grossman (1996; 2001) are supportve to ths conecture. The authors observe that women are more lkely to punsh unknd behavor toward thrd partes than men (Eckel and Grossman 1996). In a later study, they fnd that female subects are less lkely to reect ultmatum offers than male subects (Eckel and Grossman 2001). However, results of Solnck (2001) cast doubt on a hasty generalzaton. She fnds both genders to demand more from women, but female responders to reect more often than men. Andreon and Vesterlund (2001) study gender dfferences n a modfed dctator game. Women tend to equalze payoffs whle male subects are more prceelastc n ther sendng decson. In lne wth that, Cox (2002) and, more recently, Lambsdorff and Frank (2011) speculate that dfferences n punshment behavor may be explaned by gender-specfc preferences for recprocty. Women may have a greater sense for equalty, whereas men may be motvated by recprocty. Ths study may shed more lght on ths rregularty. If men and women dffer wth respect to the percepton of ntended consequences, we should observe gender-specfc dfferences n the data. 4. Expermental Desgn The experment shall elct how ntended consequences provoke negatve recprocty. The desgn compasses three treatments. Each treatment s a modfed varant of the mn ultmatum game wth an addtonal stage for a nature s move. Consder the frst treatment n fgure 2a. Fgure 2a: treatment 1 - mldly unknd player A (60,40) N low (0.5) hgh (0.5) player player accept reect accept reect (10,60) (0,0) (110,20) (0,0) Fgure 2b: treatment 2 - moderately unknd player A (72.5,27.5) N low (0.5) hgh (0.5) player player accept reect accept reect (35,35) (0,0) (110,20) (0,0) B (50,50) player accept (50,50) B (50,50) player accept (50,50) reect (0,0) Fgure 2c: treatment 3 - strongly unknd reect (0,0) 7

11 player A (85,15) N low (0.5) hgh (0.5) player player accept reect accept reect (60,10) (0,0) (110,20) (0,0) B (50,50) player accept (50,50) reect (0,0) Player, the proposer, can decde between two allocatons, A and B, each splttng up a sum of 100 currency unts. Allocaton A yelds a (60,40) splt and allocaton B an equal splt (50,50). The lower branch of the game tree s ust lke any other mn ultmatum game: f player proposes allocaton B, player, the responder, can ether accept or reect. If he accepts the 100 currency unts wll be splt up equally among both players. If he reects, both get zero payoffs. If player proposes allocaton A, players move to the upper branch of the game tree. In that case, nature moves next and determnes whether the (60,40) splt wll be transformed nto a hgh stake or low stake allocaton each wth 50 percent probablty. In the low stake condton the sum of payoffs shrnks to 70 currency unts. In the hgh stake condton total payoffs ncrease up to 130. As t s common for lottery experments, nature also reshuffles the dstrbuton of payoffs. In the low stake condton, allocaton A assgns 10 currency unts to the proposer and 60 to the responder. In contrast, n the hgh stake condton the proposer s supposed to get 110 and the responder 20 currency unts. In many aspects, the second and the thrd treatment are dentcal to treatment 1 (see fgures 2b and 2c). Allocaton B always dvdes the 100 currency unts equally among both players n all treatments. Lkewse, the hgh stake allocaton yelds a (110,20) splt. However, treatments dffer wth respect to the low stake allocaton (hghlghted n talcs). Whle t yelds a (10,60) splt n treatment 1, the low stake allocatons are (35,35) and (60,10) n the second and thrd treatment respectvely. The low stake allocaton feeds back on the ntended consequences behnd offerng allocaton A. In the frst treatment, the proposer reveals hs ntenton to offer 0.5 (10+110)=60 cur- deed rency unts to hmself and =0.5 (60+20)=40 to the responder. As the payoff orgnatng from the unchosen alternatve s omsson =50, actual unkndness s set to K =40-50=-10. In most ultmatum games, ths mldly unknd proposal would be accepted (see e.g. Camerer 2003: 49-55). In the second treatment, the ntended consequences for the responder amount to 8

12 deed =0.5 (35+20)=27.5 currency unts. Ths tme, offerng allocaton A s moderately unknd toward the responder ( K = =-22.5). In the thrd treatment, allocaton A results n deed ntended consequences for the responder of =0.5 (10+20)=15. Proposng allocaton A now s strongly unknd ( K =15-50=-35). In regular ultmatum games, one would expect only very few responders to accept such proposals (see e.g. Camerer 2003: 49-55). The solated effect of ntended consequences on recprocaton can be determned by comparng reecton rates to hgh stake allocatons (110,20) across treatments. Frst, fxng ths decson node sets the realzed payoff for the responder at =20 across all treatments (see table 3). Ths prevents the realzed payoffs to exert any nfluence on reecton behavor. Sec- omsson ond, foregone payoffs are constant at =50. Hence, the varaton n unkndness across treatments s solely nduced by changes n the ntended consequences of the proposed allocaton. Table 3: treatment statstcs for hgh stake allocatons Study deed omsson K treatment 1 (fgure 2a) treatment 2 (fgure 2b) treatment 3 (fgure 2c) If the ntended consequences behnd actual behavor matter for perceved unkndness (and f unkndness provokes negatve recprocty), we should fnd that THE LOWER THE INTENDED CONSEQUENCES FOR THE RESPONDER THE HIGHER THE REJEC- TION RATE After presentng the expermental desgn, t seems worthwhle to brefly address the nature move n more detal. One mght plausbly argue that the nature move s uncommonly powerful n the current desgn. In allocaton A, nature reszes the total stake and redstrbutes payoffs among both players wthn and between treatments. Ths may come at some costs for the overall understandng of the game. However, the nature move helps to overcome a set of methodologcal problems: 1. Confounds wth realzed payoffs: n regular ultmatum games, ntended and realzed consequences of actual behavor match each other. By redstrbutng payoffs wthn 9

13 each treatment the nature move dsconnects these outcomes and allows solatng the mpact of ntended consequences. 2. Confounds wth effcency: the nature move redstrbutes the low stake allocaton between treatments. The total sum of low stake payoffs, however, remans constant at 70 currency unts. As a result, the total stake sze amounts to expected values of 100 currency unts n both the lower and n the upper branch of all treatments. Alternatvely, one could vary the total sum of the low stake allocaton and keep the payoff rato at constant levels across treatments. Whle such a desgn may be easer to understand, t would also vary the (expected) stake szes across treatments. As a consequence, one could not dstngush whether dfferentals n responses are due to the ntended consequences or due to concerns for welfare. 3. Confounds wth sgnals: magne that nature would have to decde between a (40,60) and an (80,20) splt. Allocaton A would then be equvalent to offerng a (60,40) splt. Now consder an alternatve scenaro n whch responses to an ntended splt of (80,20) shall be observed. In ths stuaton, nature would have to decde between an (80,20) and an (80,20) splt. Nature would have no choce, ts move would be redundant. Ths may affect the percepton of the actual choce beyond the scope of ntended consequences. In the frst example, a responder may thnk that the sgnal about the ntended consequences arrved rather dstorted. Own payoffs could range from 20 to 60 currency unts. In the latter example, however, there s no doubt about the severty of actual behavor. The proposer wants the responder to get 20 currency unts. Wthout transformng allocaton A nto a low and a hgh stake allocaton, treatments would be largely mbalanced wth respect to payoff varance. One would not be able to dfferentate whether dfferences n reecton rates are nduced by the ntended consequences or by changes n payoff varances. The current desgn fully accounts for the frst two confounds. The potental mpact of sgnals, however, has only been reduced by transformng allocaton A. Payoff varances stll change wth treatments. Note that ths s a natural dsadvantage of usng any knd of stochastc devce (see e.g. the desgns of Cushman et al. 2009, Schächtele et al. 2011). If we want to keep unchosen alternatves constant and at the same tme dsconnect ntended and realzed payoffs we have to accept that actual behavor may also be slghtly affected by changes n payoff varances. 10

14 5. Expermental Procedures The three treatments were embedded n a seres of laboratory experments at the Unversty of Passau n December The game was preceded by a dctator game and another two ultmatum games. Subects played n absolute stranger protocols, e.g. they were never matched wth another subects more than once. In order to mnmze spll-over effects from prevous games, there was no feedback provded on other player s behavor and payoffs untl the very end of the experment. 4 Subects were recruted by standard methods such as emal nvtatons, advertsng n bulletns, blogs, lectures and so forth. Upon arrval, partcpants were nstructed on laboratory rules, the expected duraton of the experment, payment and blndness procedures. Partcpants were randomly splt nto two groups and guded to separated laboratores. The sessons were run computer-based and wth neutral framng. Treatments were programmed and conducted wth the software z-tree (Fschbacher 2007). Responders partcpated n only one treatment and were asked to state complete strateges compassng responses for each decson node (strategy method). 5 As to mantan full sngle-blndness, players only nteracted wth counterparts from the other computer lab. Each subect receved a show-up fee of 2 Euros. The exchange rate was 1 currency unt = 2 Eurocent. At the very end of a sesson, payoffs were summed up across all games and dsplayed as a whole n order to ensure expermenters could not nfer actual play. 6. Results In total, ten sessons were run wth 264 subects partcpatng. Each treatment was played by 80 to 96 subects. The average student was 22 years old wth a mnmum (maxmum) age of 19 (35). The mean semester was percent (91 subects) were male. Ths proporton s n lne wth gender representaton at advanced undergraduate levels at the Unversty of Passau. Each sesson lasted around 23 mnutes. Average payoffs were 5.13 Euros for that tme wth a mnmum (maxmum) of 2 (8.40) Euros. For comparson, a student assstant at the Unversty of Passau earns 7 Euros per hour. 4 Although such desgns are extremely powerful for estmatng utlty functons and decrease the costs of experments, many economc researchers are stll reluctant to employ wthn-subect desgns. Ther man concern s that exposure to smlar treatments may generate uncontrolled spll-over effects. Whle ths concern may be partcularly vald n repeated nteracton, the results of regresson analyses n ths study do not show that prevous games exert sgnfcant nfluence on behavor n the current game. In contrast, I beleve that the prevous games even helped to better understand the nature of the game. 5 See Charness and Levne (2007: 1055), Cox et al. (2007), or Schächtele et al. (2011: 1) for recent dscussons on strategy and game method n experments focusng on recprocty. I could not thnk of any reason why treatments should nteract wth contngent responses. 11

15 Descrptve Analyss Fgure 3 depcts how often proposer have chosen allocaton A across treatments. The maorty of proposers choose equal splts (allocaton B) regardless of whch treatment they are playng. Frequences of proposng allocaton A n treatments 1 and 3 reman generally low at levels around 23 percent whereas allocaton A s chosen almost half the tme when nature allows for an equal splt of 35:35 n the low stake condton. Fgure 3: proposer behavor across treatments % frequency of allocaton A proposals overall male female , , ,15 treatment 1 treatment 2 treatment 3 ntended consequences for proposer and responder The spke n treatment 2 rases the queston why proposers choose allocaton A more often n ths treatment. One possble explanaton s provded by Güth et al. (2001). The authors argue that responders may perceve even small devatons from equal splts as relatvely unknd. If proposers n treatment 2 antcpate ths, they may assume the equal splt n the low stake condton to serve as an alternatve focal pont to the equal splt n allocaton B sgnalng ther preference for equalty. They may try hdng behnd t hopng that unfavorable outcomes are attrbuted to nature s rather than ther own move. Nevertheless, proposng allocaton A s not the best response to actual responder behavor. Ex-post proposer earnngs from offerng allocaton A are 39.9 currency unts n treatment 1, 45.1 currency unts n treatment 2, and 47.7 currency unts n treatment 3 qute below expost earnngs of almost 50 currency unts orgnatng from offerng allocaton B. 6 Female subects propose A sgnfcantly less often than male proposers (t=1.88, p=0.06, two-sded). They ether accurately guess that allocaton B s payoff-maxmzng or they may have a stronger propensty to care for equalty. 6 Actual reecton rates to allocaton B are 2.1/0/0 percent n treatments 1/2/3. 12

16 The next fgures show reecton rates across treatments to allocaton A n the low stake condton (fgure 4a) and n the hgh stake condton (fgure 4b). In fgure 4a, we observe reecton rates of 12.5 percent n treatment 1, 7.5 percent n treatment 2 and 40.9 percent n treatment 3. No maor dfferences across gender can be found. 7 Although the overall trend suggests a negatve correlaton between ntended responder s payoff and reecton rates, note that realzed outcomes also vary across treatments, rangng from 60, 35, and 10 currency unts for the responder. Ths fndng s thus not surprsng. Fgure 4a: responder behavor n the low stake condton % reecton rates to "low" stake allocatons A (110,20) overall male female treatment 1 treatment 2 treatment 3 ntended consequences for responder Fgure 4b: responder behavor n the hgh stake condton % reecton rates to "hgh" stake allocatons A (110,20) overall male female treatment 1 treatment 2 treatment 3 ntended consequences for responder As explaned before, the solated mpact of ntended consequences on negatve recprocty s captured by reecton rates to hgh stake allocatons. At ths node the level of unkndness 7 t=-1.16, p=0.25 for treatment 1, t=0.19, p=0.85 for treatment 2, and t=0.57, p=0.57 for treatment 3 (all twosded). 13

17 vares across treatments whle unchosen alternatves and realzed payoffs are held constant. In the frst treatment, 35.4 percent of all hgh stake allocaton are reected (see fgure 4b). In the second treatment, responders reect the (110,20) offer n 47.5 percent of all cases. In the thrd treatment, the hgh stake allocaton s reected by 45.5 percent of the responders. The dfferences n reecton rates between treatments 1 and 3 (t=0.98, p=0.17, one-sded) and between treatments 1 and 2 (t=1.14, p=0.13, one-sded) ndcate an overall trend that s n lne wth the hypothess that ntended consequences matter. But these effects mss conventonal levels of sgnfcance. Moreover, the dfference between reecton rates n treatments 2 and 3 ponts toward the wrong drecton (t=0.19, p=0.57, one-sded). More unknd offers are slghtly less often reected comparng treatments 2 and 3. We must hence state that the mpact of ntended consequences on negatve recprocty appears to be of weak nature, less mportant than suggested by current recprocty theores. Fgure 4b also depcts reecton rates sorted by the responders gender. Across all three treatments, reecton rates of female subects are around 50 percent broadly nvarant to changes n the ntended consequences. Reecton rates of male responders are sgnfcantly below that rate (t=2.47, p=0.02, two-sded) and seem to dffer across treatments. When proposers act only mldly unknd, male responders abstan from retalaton (1 of 15 male responders reect). Reecton rates n the frst treatment are sgnfcantly lower than n the second (t=2.37, p=0.01, one-sded) and n the thrd treatment (t=1.73, p=0.05, one-sded). But ntended consequences seem only to matter for mldly unknd offers. There s no sgnfcant dfference between reecton rates n treatments 2 and 3 (t=0.38, p=0.65, one-sded). Probt Analyss The descrptve analyss dd not control for effects other than the treatment manpulaton. The followng estmatons provde a more n-depth nvestgaton of reecton behavor. Table 4 reports the results of two probt regressons on the lkelhood to reect the hgh stake allocaton (110,20). The leftmost column lsts the explanatory varables: the ntended consequences when proposng allocaton A mnus 27.5, 8 a gender dummy (=1 for female responder), and an nteracton term between the gender dummy and ntended consequences that wll be explaned below. The next columns provde coeffcents, z-statstcs, and p-values for sets of varables of both models. Model statstcs are reported at the very bottom of table 4. Table 4: probt results probablty to reect the hgh stake allocaton (110,20) 8 By subtractng 27.5 from ntended consequences, the second treatment s normalzed to be the baselne. 14

18 model 1 model 2 ndependent varable coef. z p> z coef. z p> z constant ntended consequences female female x (ntended consequences 27.5) N Pseudo R² The results of the frst estmaton corroborate the prevous conecture that the ntended consequences of an acton play only a margnal role for responder behavor (model 1). The correspondng coeffcent has the predcted sgn. An ncrease n ntended consequences for the responders tends to lower the lkelhood to reect the hgh stake allocaton. But ths effect s beyond conventonal levels of sgnfcance (p=0.415). We also fnd evdence that nequalty averson may be more pronounced among female responders. Women are sgnfcantly more lkely to reect than male responders (p=0.017). Capturng the nteracton between gender and ntended consequences, model 2 provdes the results of a second probt analyss ncludng a correspondng cross term. Ths term captures the dea that women may not react to varatons n the ntended consequences, whle men do respond to changes. Agan, we observe the coeffcent of ntended consequences for the responder to be negatve. Ths tme the effect s weakly sgnfcant (p=0.088). Ths gves some credt to the hypothess that the lower the ntended consequences the hgher the probablty to reect. Note, however, that ths effect only embraces male responders. As conectured n the descrptve secton, t completely vanshes among female responders (although here the cross term varable slghtly msses conventonal levels of sgnfcance wth p=0.129). Agan, there s also sgnfcant evdence for a stronger general nclnaton of women to reect gven offers (p=0.022). 7. Dscusson Across treatments, reecton rates are generally hgh ndcatng preferences for equalty beng prevalent among all subects. Ths effect s more pronounced among female responders. Confrontng responders wth dfferent levels of unkndness drven by ntended consequences stmulates only very weak varaton n reecton rates. As a result, we have to reect the dea that ntended consequences generally matter for recprocal responses. However, ths study restrcts ts analyss to ntended consequences n the doman of unknd behavor. It remans 15

19 open for future research to nvestgate the effects of ntended consequences for knd behavor. 9 Wth respect to the gender dfferences observed n many farness games ths study can contrbute to the ongong debate among scholars. Cox (2002) and Lambsdorff and Frank (2011) argue that women may be less strongly motvated by concerns for negatve recprocty but try to reduce dfferences n realzed payoffs. The results of ths study confrm ths conecture. Male responders exercse negatve recprocty when observng hghly unknd offers but abstan from retalaton when proposers exercse only slghtly unknd behavor. Women, nstead, are found to be largely nvarant to changes n the ntended consequences of an acton. They may rather perceve kndness by evaluatng foregone and realzed payoffs. A possble explanaton for ths phenomenon may come from neghborng dscplnes. In socal psychology, for example, t s wdely beleved that women and men pass through dfferent forms of socalzaton that successvely trgger dfferent cogntve processes for assgnng e.g. causalty and responsblty (e.g. Belng et al. 2001; Bottoms et al. 2011). Women could for nstance dsrespect the 50 percent chance of gettng 60 n the frst treatment and attrbute ntentons based on a worst-case scenaro a bas known as probablty neglect n rsk percepton research (e.g. Rottenstrech and Hsee 2001). They may assess the unkndness of an acton by evaluatng the maxmum harm assocated wth actual behavor. Men, n contrast, may buld up belefs about the other player s ntended consequences usng the obectve probabltes. They may refer to the most-lkely scenaro. 8. Concluson Recprocty models argue that deeds and omssons drve our percepton of another person s kndness. Whle the mpact of foregone payoffs has been ntensvely studed, lttle has been done to nvestgate whether the ntended consequences of the actual behavor matter for recprocaton. Ths paper nvestgates how ntended consequences can provoke negatve recprocty. It presents an expermental desgn that s able to vary the ntended consequences of an acton at constant levels of realzed and alternatve payoffs. In each treatment proposers can ether offer an equal splt or flp a con to determne the actual payoff allocaton. In the frst treatment, flppng the con s mldly unknd. In the second treatment, t s moderately unknd, whereas n the thrd treatment flppng the con s strongly unknd toward the responder. Comparng responses at constant levels of realzed payoffs and unchosen alternatves, we fnd only an nsgnfcant mpact of ntended consequences on reecton rates. On aggregate terms, these fndngs suggest that unkndness evaluatons barely ncorporate ntended conse- 9 For example, a straghtforward method to test the mpact of ntended consequences on knd behavor would be to set the foregone payoffs n each treatment to (100,0). 16

20 quences. But behavor dffers across subects genders. Male subects appear to react to varatons n ntended consequences whle female players seem to be rather nvarant. Ths rregularty can be explaned by gender-specfc notons of farness. The maorty of men may be realsts, whle women are more pessmstc about the other player s ntended consequences. 17

21 References Andreon, J., and Vesterlund, L. (2001). Whch s the far sex? Gender dfferences n altrusm. Quarterly Journal of Economcs, 116(1), Belng, J., Hudson, S. M., and Ward, T. (2001). Female and male undergraduates' attrbutons for sexual offendng aganst chldren. Journal of Chld Sexual Abuse, 10(2), Blount, S. (1995). When socal outcomes aren't far: the effect of casual attrbutons on preferences. Organzatonal Behavor and Human Decson Processes, 63(2), Bolton, G. E., and Ockenfels, A. (2005). A stress test of farness measures n models of socal utlty. Economc Theory, 25(4), Bottoms, B. L., Kalder, A. K., Stevenson, M. C., Oudekerk, B. A., Wley, T. R., and Perona, A. (2011). Gender dfferences n urors perceptons of nfantcde nvolvng dsabled and non-dsabled nfant vctms. Chld Abuse & Neglect, 35, Brandts, J., and Solà C. (2001). Reference ponts and negatve recprocty n smple sequental games. Games and Economc Behavor, 36, Camerer, C. F. (2003). Behavoral Game Theory: Experments n Strategc Interacton. Prnceton, NJ: Prnceton Unversty Press. Charness, G., and Levne, D. I. (2007). Intenton and stochastc outcomes: an expermental study. Economc Journal, 117, Cox, J. C. (2002). Trust, recprocty, and other-regardng preferences: groups vs. ndvduals and males vs. females. In R. Zwck and A. Rapoport (ed.). Expermental Busness Research (pp ), Boston: Kluwer Academc Publshers. Cox, J. C., Fredman, D., and Gerstad, S. (2007). A tractable model of recprocty and farness. Games and Economc Behavor 59: Cushman, F., Dreber, A., Wang, Y., and Costa, Y. (2009). Accdental outcomes gude punshment n a tremblng hand game. PLOS One, 4(8), 1-7. Dufwenberg, M., and Krchsteger, G. (2004). A theory of sequental recprocty. Games and Economc Behavor, 47, Eckel, C. C., and Grossman, P. J. (1996). The relatve prce of farness: gender dfferences n a punshment game. Journal of Economc Behavor and Organzaton, 30(2), Eckel, C. C., and Grossman, P. J. (2001). Chvalry and soldarty n ultmatum games. Economc Inqury, 39,

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23 Volkswrtschaftlche Rehe der Passauer Dskussonspapere Bsher snd erschenen: V-1-98 V-2-98 V-3-98 V-4-98 V-5-98 V-6-98 V-7-98 V-8-98 V-9-98 V V V V V Gerhard Rübel, Can adustments to workng hours help reduce unemployment? Martn Werdng, Pay-as-you-go Publc Penson Schemes and Endogenous Fertlty: The Reconstructon of Intergeneratonal Exchange Carsten Eckel, Internatonal Trade, Drect Investment, and the Skll Dfferental n General Equlbrum Renar Lüdeke, Das Staatsbudget und ntergeneratonelle Umvertelung, Das Staatsvermögen als Instrument ntergeneratver Vertelungspoltk und der generatonal accountng -Ansatz: Alter Wen n neuen (höherwertgen) Schläuchen? Ana Klüver und Gerhard Rübel, Räumlche Industrekonzentraton und de komparatven Vortele von Ländern - ene emprsche Stude der Europäschen Unon Klaus Beckmann und Elsabeth Lackner, Vom Levathan und von optmalen Steuern Martn Werdng, The Pay-as-you-go Mechansm as Human Captal Fundng: The Mackenroth hypothess Revsted Renar Lüdeke und Klaus Beckmann, Socal Costs of Hgher Educaton: Producton and Fnancng. The Case of Germany (1994) Gerhard Rübel, Fare Löhne und de Flexbltät von Arbetsmärkten n enem Zwe-Sektoren-Modell Klaus Beckmann, Notzen zum Steuerantel von Rentenverscherungsbeträgen m Umlageverfahren Chrstan Jaspernete und Hans Joachm Allnger, Trendwende am westdeutschen Arbetsmarkt? - Ene ökonometrsche Analyse Chrstan Jaspernete und Hans Joachm Allnger, Langfrstge Perspektven für den westdeutschen Arbetsmarkt: Was sagen de Gesetze von Okun und Verdoorn? Hans Joachm Allnger und Chrstan Jaspernete, Sasonberengung von Arbetsmarktdaten be aktver Arbetsmarktpoltk Renar Lüdeke und Klaus Beckmann, Hochschulbldung, Humankaptal und Beruf: Auswertung ener Längsschnttsbefragung Passauer Absolventen

24 V Gerhard Rübel, Volksenkommensstegerung durch ausgabenfnanzerte Steuersenkung - Ene Umkehrung des Haavelmo-Theorems für offene Volkswrtschaften V Slke Klüver, Konzentratonsursachen n der europächen Verscherungsbranche - ene emprsche Untersuchung V V V V V V V V V V V V V V Renar Lüdeke, Famlenlastenausglech, Elternlestungsausglech und de Neufunderung der umlagefnanzerten Altersversorgung Ana Klüver und Gerhard Rübel, Industrelle Konzentraton als Krterum für de Geegnethet enes enhetlchen Währungsraums Ene emprsche Untersuchung der Europäschen Unon von 1972 bs 1996 Carsten, Eckel, Fragmentaton, Effcency-seekng FDI, and Employment Chrstan Jaspernete, Understandng Hysteress n Unemployment: The German Case Jörg Althammer, Reformng Famly Taxaton Carsten Eckel, Labor Market Adustments to Globalzaton: Unemployment versus Relatve Wages Klaus Beckmann, Tax Competton through Tax Evason Klaus Beckmann, Steuerhnterzehung, begrenzte Ratonaltät und Referenzabhänggket: Theore und expermentelle Evdenz Klaus Beckmann, Soldarty, Democracy, and Tax Evason: an Expermental Study Mchael Frtsch, Udo Brxy und Olver Falck, The Effect of Industry, Regon and Tme on New Busness Survval - A Mult-Dmensonal Analyss Gerhard D. Klenhenz, Bevölkerung und Wachstum - De Bevölkerungsentwcklung n Deutschland als Herausforderung für Wrtschafts- und Sozalpoltk Johann Graf Lambsdorf, The Puzzle wth Increasng Money Demand - Evdence from a Cross-Secton of Countres Frauke Davd, Olver Falck, Stephan Heblch und Chrstoph Knedng, Generatonsgerechtgket und Unternehmen Roland Engels, Zur mkroökonomschen Funderung der Geldnachfrage n allgemenen Glechgewchtsmodellen

25 V V V V V V V V V V V V V V V V V Johann Graf Lambsdorff, Between Two Evls Investors Prefer Grand Corrupton! Olver Falck, Das Schetern unger Betrebe En Überlebensdauermodell auf Bass des IAB-Betrebspanels Raphaela Seubert - On the Nature of the Corrupt Frm: Where to Stuate Lablty? Johann Graf Lambsdorff Consequences and Causes of Corrupton What do We Know from a Cross-Secton of Countres? Stephan Heblch - Arbetszetflexblserung Revsted Olver Falck und Stephan Heblch - Das Konzept der egenverantwortlchen Generaton zur Bewältgung des demographschen Wandels Floran Brkenfeld, Danel Gastl, Stephan Heblch, Ferry Lenert, Mascha Maergoyz, Oksana Mont und Andrus Plepys - Product ban versus rsk management by settng emsson and technology requrements the effect of dfferent regulatory schemes takng the use of trchloroethylene n Sweden and Germany as an example Johann Graf Lambsdorff - Determnng Trends for Perceved Levels of Corrupton Olver Falck - Mayfles and Long-Dstance Runners: The Effects of New Busness Formaton on Industry Growth Johann Graf Lambsdorff und Chrstan Engelen - Hares and Stags n Argentnean Debt Restructurng Johann Graf Lambsdorff und Mathas Nell Let Them Take Gfts, and Cheat Those Who Seek Influence Hans Joachm Allnger Bürgerverscherung und Kopfpauschale haben veles gemensam Anmerkungen zur Dskusson ener Reform der gesetzlchen Krankenverscherung Mchael Schnke und Johann Graf Lambsdorff - Insder Tradng among Central Bankers a Treatse on Temptaton and Polcy Choce Johann Graf Lambsdorff und Hady Fnk - Combatng Corrupton n Colomba: Perceptons and Achevements Olver Falck und Stephan Heblch - Corporate Socal Responsblty: Enbettung des Unternehmens n das Wrtschaftssystem Johann Graf Lambsdorff und Luka Baec - There Is No Bank Lendng Channel! Chrstan Engelen und Johann Graf Lambsdorff - Das Keynesansche Konsensmodell

26 V V V V V V V V V V V V V V V V V Stephan Heblch - Egenverantwortlche Indvduen und Pro-Aktve Unternehmen Chrstan Engelen und Johann Graf Lambsdorff - Das Keynesansche Konsensmodell ener offenen Volkswrtschaft Chrstan Engelen und Johann Graf Lambsdorff - Farness n Soveregn Debt Restructurng Johann Graf Lambsdorff und Börn Frank - Corrupt Recprocty - an Experment Mathas Nell - Strategc Aspects of Voluntary Dsclosure Programs for Corrupton Offences - Towards a Desgn of Good Practce - Mathas Nell - Contracts Induced by Means of Brbery - Should they be Vod or Vald? Mchael Pflüger De Neue Ökonomsche Geographe: En Überblck Floran Brkenfeld und Shma'a Hanafy - We zentral snd de Abschlussprüfungen an deutschen Schulen wrklch?" Floran Brkenfeld - Klene Klassen und gute Luft - Warum snd de Grundschulen auf dem Land besser? Johann Graf Lambsdorff The Organzaton of Antcorrupton Gettng Incentves Rght! Olver Farhauer und Alexandra Kröll - Verfahren zur Messung räumlcher Konzentraton und regonaler Spezalserung n der Regonalökonomk Olver Farhauer und Alexandra Kröll - De Shft-Share-Analyse als Instrument der Regonal- und Clusterforschung Johann Graf Lambsdorff Deterrence and Constraned Enforcement Alternatve Regmes to Deal wth Brbery Johann Graf Lambsdorff Who Accepts Brbery? Evdence from a Global Household Survey Olver Farhauer und Alexandra Kröll What We Can and What We Can t Say About Employment Growth n Specalsed Ctes Johann Graf Lambsdorff, Manuel Schubert und Marcus Gamatte On the Role of Heurstcs - Expermental Evdence on Inflaton Dynamcs Manuel Schubert und Johann Graf Lambsdorff On the Costs of Kndness An Expermental Investgaton of Gulty Mnds and Negatve Recprocty