Do My Previous Good Deeds To Third Party Make People More Tolerant to My Current Bad Deeds? P. Ndodjang, G. Grolleau, L. Ibanez

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1 Do My Previous Good Deeds To Third Party Make People More Tolerant to My Current Bad Deeds? P. Ndodjang, G. Grolleau, L. Ibanez Abstract: Recent studies showed that past good deeds can license individuals to engage in socially undesirable behaviours such as cheating or lying. How do people react to a mix of good deeds to a third party and bad deeds against them? Do they punish the bad deeds regardless of previous good deeds to third party or are they more tolerant to bad deeds because of the good deeds done previously? We conduct an experiment where a player A performs a good deed towards another player B in period 1. Afterward, player A serves as a proposer and player C as a responder in an ultimatum game in second period. Using the strategy method, we examine whether a responder becomes more or less tolerant to unfair proposals from player A, knowing the previous good deeds of A towards B. Our results show that previous good deeds make responders substantially more tolerant to unfair proposals (i.e., proposals lower than 30% of the initial endowment in the control group) which are usually refused. These results are consistent with psychological studies that extend the licensing effect to relationships with others. We draw several policy and managerial implications. Key-words: experiment; licensing; reciprocity, social norms, punishment. JEL codes: C91; D03 1. Introduction It is frequent to see individuals performing good and bad deeds. The theory of reciprocity predicts that good deeds are usually rewarded while bad ones are punished. Some people are willing to sacrifice resources to reciprocate even if it is costly and without expecting present or future material rewards (Rabin, 1993; Falk and Fischbacher, 2006). Nevertheless, little is known on how people react to a mix of bad and good deeds, especially if their reaction is costly for them. In this paper, we go a step further and explore how individuals behave when they face a bad deed perpetrated by someone who has previously performed a good deed directed to third party? Does the victim simply ignore this previous good deed and react to the bad deed? Or does he take into account the virtuous act, and if so what will be the global account? For example, will consumers be less willing to boycott a polluting firm if this firm devotes a part of its profits to fight hungriness? To fill this gap, we design a simple experiment where an individual A performs first a good deed towards B and after a bad deed towards C. We investigate whether a previous good deed performed by A in favor of B make C more tolerant to A s bad deed. The originality of our paper is at least twofold. First, we consider in a coherent framework how people react to a mix of good and bad deeds, directed at different individuals. Second, we test the predictions of licensing to others theory. The remainder of this paper is organized as follows. Section 2 provides an overview of related literature and presents our main behavioural hypothesis. Section 3 exposes the experimental design. The results are presented and discussed in section 4. Section 5 concludes and draws some policy implications. 1

2 2. Overview of related literature and hypothesis According to Bénabou and Tirole (2006), psychologists frequently describe people s behaviour as being influenced by a strong need to maintain conformity between one s actions, or even feelings, and certain values, long term goals, or identities they seek to uphold. Nevertheless, individuals actions do not always seem consistent. For instance, one will refrain from eating an unhealthy main course and will feel himself licensed to choose a sweet dessert. Subsequent actions which are inconsistent with prior deeds can be due to the influence of these prior deeds. It is precisely what the moral licensing theory predicts: prior good deeds can affect individuals future behavior and liberate them to act in ways that are not consistent with prior actions 1. Even if their number is still limited, some studies provide empirical support for the insight that past good deeds can license individuals to engage in socially undesirable behaviours. For example, Khan and Dhar (2006) showed that preference for a luxury product is significantly higher for individuals who perform a charity action first (57.4%) than others who do not do it (27.7%). In the same vein, Sachdeva and al. (2009) found that writing a self-relevant story containing positive words referring to fairness and carefulness reduces people s donation (up to $10) to a charity of their choice ($ 5.30 for those who wrote a negative story and $1.07 for those who wrote a positive story). In another experiment, Mazar and Zhang (2010) showed that purchasing green products increased antisocial behaviours, such as lying and stealing. From a conceptual viewpoint, the self-licensing literature suggests two mechanisms that can explain how good deeds can lead to subsequent bad deeds. Either good deeds reframe bad deeds moral credentials or merely balance bad ones out moral credits" (Effron and Monin, 2009; Miller and Effron, 2010). In the moral credentials model, good deeds change the meaning of subsequent behaviours, which are not perceived as bad deeds at all. For instance, using low-energy light-bulb can unconsciously lead the individual not to switch off lights when leaving a room thinking that he doesn't waste energy because of energy-saving bulb. In the moral credits model, good deeds establish moral credits like deposits in a bank account that can be withdrawn to purchase the right to do bad deeds (Merritt and al., 2010 and references therein; Krumm and Corning, 2008 ; Effron and Monin, 2009 ; Miller and Effron, 2010). Related studies in psychology demonstrate that individual s prior good deeds make people more willing to license her subsequent bad deed (Krumm and Corning 2008; Effron and Monin, 2009; Merritt and al., 2010; Miller and Effron, 2010). Licensing theory predicts that individuals, like people who observe them, are sometimes willing to license morally dubious behaviours based on individuals prior moral behaviour (Merritt and al., 2010). The theory of reciprocity is a frequently used framework to analyze how individuals react to others behaviors. In sum, this theory predicts that good deeds are usually rewarded while bad ones are punished. This theory has undergone several refinements, for instance, by distinguishing direct versus indirect reciprocity or altruistic versus strong reciprocity. Fehr and al. (2002); Fehr and Fischbacher (2004) shed light on the difference between strong reciprocity and altruistic reciprocity. An altruistic reciprocator conditions his behaviour on the previous behaviour of another actor. He is willing to help another actor even if it is costly because he expects long term net benefits. On the other hand, a person is a strong reciprocator if he is willing to sacrifice resources to reward fair and to punish unfair behaviour even if this is costly and provides neither present nor future material rewards for him (Fehr and al., 2002). This strong reciprocator does not only condition his behaviour on the previous behaviour of others, but also rewards the respect of social norms and punishes their violation. The model of 1 Sachdeva and al. (2009) provide evidence that this phenomenon also occurs in the opposite direction. Indeed, because of previous bad deeds, individuals can be more likely to undertake good deeds, that is, moral cleansing. 2

3 Falk and Fischbacher (2006) also predicts that there are two aspects underlying the evaluation of the kindness of an action: the consequences of the considered action, and the agent s underlying intentions. Nevertheless, reciprocity models do not offer clear predictions of a victim s behaviour when the author of the bad deed has previously performed a good deed in favour of a third party. We call this situation a reciprocity dilemma because direct and indirect reciprocity collides and the overall effect is indeterminate. In our above mentioned example, if player C is an altruistic reciprocator, he will punish player A because A was unkind towards him and he did not expect short or long term net benefits. However, strong reciprocity predicts that C could reward A because of his good deed towards B in order to reward the respect of some social norms. The inequity aversion developed by Fehr and Schmidt (1999) constitutes an alternative framework to predict individuals behavior when they interact with others. This theory asserts that individuals are averse to inequity and are willing to sacrifice resources to reduce it. Unlike predictions of traditional economics, which stipulate that agents maximize their absolute payoff regardless of their past actions or of others choices, we assume that past actions do matter and influence the willingness of individuals to reduce inequity. 3. Experimental strategy We conducted a paper-pencil experiment with students and staff from universities of Montpellier and Nîmes (South of France). 159 students (from a wide range of disciplines) and staff (Mean age = 36.6 years and 78% females) participated in this experiment. Participants were members of the university choir and the experiment was run at the end of weekly rehearsals. All subjects were unfamiliar with experimental economics, they received a showup-fee of 5. The instructions were read loudly by the monitor and were also available on a written sheet. Participants were asked not to talk during the experiment; otherwise they will be excluded from the drawing lots. A 30 prize was attributed to every pairs of participants chosen through drawing lots. Before inviting the subjects to take their decisions, the monitor asked them whether they have well understood the rules of the game. The experiment was a between subject experiment and allows to compare how people react to a bad deed performed after a good deed (Good Deed Treatment: GDT) to a treatment without previous good deed (Control Treatment: CT). The GDT includes two stages. In the first stage, a player A had the possibility to engage himself into a prosocial action towards another player B. The prosocial action or good deed is the time spent to help one of the most popular French charities, which aims is to distribute food packages and hot meals to the needy, namely the Restos du Coeur (considered here as the benefactor or player B). Player A had the possibility to choose the number of hours that he is willing to spend to help: 0 hour, 1 hour, 2 or 3 hours. He was informed that in a second stage he would be playing with another player who would be informed about his choice. We let the possibility for player A not to help as the objective of the first stage was to implement a voluntary good deed. This stage of the experiment was based on oral commitment without any enforcement device. According to Akerlof, (2005), norms of appropriate behaviours differ across space and time. Given that, players C of GDT were asked to appreciate the action of player A on a Likert 9-point scale (from 1=bad deed to 9=good deed). Overall, 4 sessions of 15 minutes each were run with all of participants (randomly selected as follows: 12 participants as player A and 147 participants as player B). Players A were in another room playing at the same time with Players C. In the second stage, we carried out an ultimatum game where player A served as a proposer and player C as a responder. Player C in GDT was previously informed about the player A s decision in the first stage. Indeed, player C of this treatment knew that player A had 3

4 voluntarily stated that he was ready to devote time to help Restos du Coeur. The CT concerned only the second stage, no information was given about player A. We used the strategy method meaning that player C makes her choice (accept or reject) for each of the five player A s offers, thus we predefined these offers as follows : 50%, 40%, 30%, 20%, and 10% of player A s endowment ( 30).This strategy method allowed us to elicit the minimum share that player C is willing to accept. Player C was also asked to state the minimum that he was willing to accept. A full version of experimental instructions can be found in appendix. Even if the strategy method reduces the role of the player A, his presence remains essential for the drawing lots. At the end of the two stages we selected pairs of winners A and C and they were paid according to the game rules. Formally, each set of two winning players were paid if the player A offer was higher or equal to the minimal share accepted by player C. The average gain for each winner was about Results and discussions In general, results of ultimatum game experiments show that the modal offer lies in range between 40% and 50% of endowment (Güth and al, 1982; Falk and Fischbacher, 2006). In our experiment, player A s offer starts from 50% of his endowment. Offers less than 40% are considered as unequal offers and therefore can be considered as bad deeds. We focused only on player C s behaviour, resulting from second stage in the treatments GDT and CT. In an ultimatum game, the recipient can punish the proposer for cheating on an implicit social norm of reciprocal sharing by rejecting the proposer s offer (Hoffman and al; 2008). Thus, we hypothesize that we should find a difference in acceptance rates for unequal offers between the two treatments. In other words, player Cs in the GDT will accept more unfair offers than players C in the CT. First, we estimated how players C evaluate the voluntary action of player A towards Restos du Coeur (i.e. player B). The average note for player A s volunteering given by player C is equal to 8.07 on a Likert 9-point scale. This supports the insight that players C (in the GDT) consider the volunteering of player A as a good deed. Players C of Control treatment were not concerned by this step. Figure 1 shows the mean minimum offer that players C of both two groups are willing to accept. In the good deed treatment this amount is 4.21 against 6.55 in the Control group. This corresponds respectively to 14% and 21.8% of player A s endowment. In other words, the minimum acceptable offer of players C in the Good Deed Treatment is less than the minimum acceptable offer in the Control treatment. This difference is significant (p=0.004) and exhibits the effect of a previous good deed on the player C s decision making. Figure1: Average minimum acceptable offer % of % of CT GDT Mean of minimum acceptable offer 4

5 Figure 2 indicates that acceptance rates of players C decrease with the offers of player A, and players C accept fair and unfair offers of players A on average. This figure also depicts how the acceptance rates of a given percentage of 30 vary between GDT and CT. Figure 2: Acceptance rates of offers between the two groups CT GDT 100% 92% 76% 64% 56% ar50% ar40% ar30% ar20% ar10% ar: acceptance rate of the offer X% We notice that the acceptance rates of the control group (CT) are consistent with results of previous studies on the ultimatum game. Indeed according to Falk and Fischbacher, (2006) meta-analysis of UG experimental results show that offers close to 50% are practically never rejected, and the rejection rate for offers below 20% is high. More precisely, results in literature have shown that when the proposer offers the receiver an unequal share of around 20-30% of the pie, the receivers sense of fairness is often violated, and as consequence, rejection rates are around 40-60% (...) (Andrade and Ariely, 2009, p.3). Our results show that rejection rates of offers around 20-30% of the endowment are about 39-56%. This rate reaches 72% for the lowest offer. Indeed, Güth and al. (1982) argued that the typical consideration of player C seems to be as follows: If player A left a fair amount to me, I will accept. If not and I do not sacrifice too much, I will punish him by rejecting his split. Table 1. Acceptance rates of offers by players C for the CT and GDT treatments ar50% ar40% ar30% ar20% ar10% Average minimum accepted offer (in ) GDT 100% 92% 76% 64% 56% 4.21 CT 100% 86% 61% 44% 28% 6.55 P> ar : acceptance rate of X% of player A s endowment Indeed, our main results show that there is a significant difference between the acceptance rates of unfair offers between the two groups (see table 1). Players C of the GD treatment accept on average and significantly more unfair offers than player C of the control group. This difference is salient and increases for offers below 20%; more offers decrease as the gap increases between the two groups (p=0.017 for 20% and p=0.001 for 10%). These results 5

6 show that previous good deeds matter. This finding supports our main hypothesis. Even if he is victim of a bad deed, player C is more tolerant towards a player who stated doing a good deed than towards a proposer who has not done any good deed. Thus, licensing occurs when observers reduce their condemnation of morally dubious behavior of the actor who committed it in light of actor s prior good deeds (Effron and Monin, 2009). If players C considers the previous good deeds of A towards B and become more tolerant to unfair proposals from players A although they are victims, it means that they devote some consideration to the good deed of players A towards players B. So in a mix of good and bad deeds, the bad one can be more tolerated if the actor performed a previous good deed. These results support the licensing to others effect. We show that even if player C isn t directly concerned by the previous action of player A (volunteering at Restos du Coeur ), it changes significantly his private decisions and ultimately affects his pay-off. 5. Conclusion Our experimental findings support that proposer s previous good deed to third party make responders substantially more tolerant to his unfair proposals. Player C of the GD treatment accepts on average and significantly more unfair offers than player C of the control group. More than a half of players C in the GD treatment accepted offers less than 30% of the player A s endowment. Unlike the mainstream, individuals are not only influenced by their payoff but also by past deeds. One of the implications on our results relates to the limit of enforcement mechanisms behind the social norms. Social norms are increasingly used in public policy to encourage prosocial behaviors, motivated by the idea that people care about other-regarding behavior and express their desire either to avoid punishment or to maintain their image as kind people. However, licensing theory shows that past prosocial behavior can license people to engage in antisocial one and makes this bad deed seem as if it was not a transgression at all. When people see others doing something, whether it is the enhancement of a resume or parking illegally, they are more likely to do the same 2. The risk of an increase in tolerating antisocial behaviors could be the way people will conceive their new social norm. Another implication is the risk of instrumentalization of the good deeds for self-interest maximization. Some firms could strategically perform prosocial activities with the aim to mislead consumers. For example, Increasing of greenwashing 3 shows that environmental practices are motivated by saving money rather than by saving the environment. The case of cause-related-products could be another example. Through Cause-related products, a firm commit (or sign up) to give more or less automatically to a charity (not-profit organization) a percentage of the selling price of his product or fund a business (plant a tree for example) as a result of the purchase of this product by the consumer 4. In some cases, the price of the product increases 5. Consumers could be more tolerant to an increase of the price of the product or to greenwashing ( bad deed') because firms reverse a share of this price for a good action or because firms performed eco-friendly practices ('good deed'). Even if there are other economics theories like inequity aversion and altruism that can explain this consumer In the 24 stores we visited in both 2009 and 2010 (same brand, same location, same size), the number of greener products (products claiming to be green) increased by73%.(terrachoice, 2010). 4 (Grolleau and al., 2011)

7 behavior, we think that performing a good deed could be a strategy for firms to maximize their profit. For future research, the inquiry of the relationship between licensing and licensing to others effects would certainly help to better understand the underlying motivations. Another interesting question could be to know whether individual s prior bad deed make others more willing to ignore his subsequent good deed. References Andrade E., and D. Ariely The enduring impact of transient emotions on decision making Organizational Behavior and Human Decision Processes, 109, 1 8. Ariely, D., A. Bracha, and S. Meier Doing good or doing well? Image motivation and monetary incentives in behaving prosocially. American Economic Review 99, no. 1: Akerlof, G. (2005) Identity and the Economics of Organizations, Journal of Economic Perspectives, 19, Benabou, R. and Tirole, J Incentives and Prosocial Behavior," American Economic Review, 96 (5), Effron, D., and B. Monin Letting People Off the Hook: When Do Good Deeds Excuse Transgressions? Personality and Social Psychology Bulletin 36, no. 12: Falk, A. and U. Fischbacher A theory of reciprocity, Games and Economic Behavior 54, Fehr, E. and K.M. Schmidt A theory of fairness, competition, and cooperation, Quarterly Journal of Economics 114, Fehr, E., U. Fischbacher, and S. Gächter Strong reciprocity, human cooperation, and the enforcement of social norms. Human nature 13, no. 1: Fehr, E., and U. Fischbacher Third-party punishment and social norms. Evolution and human behavior 25, no. 2: Güth, W., R. Schmittberger, and B. Schwarze An experimental analysis of ultimatum bargaining. Journal of Economic Behavior and Organization 3, no. 4: Grolleau, G., L. Ibanez, and S. Moulla Éléments d analyse économique des produits partage. Revue internationale de droit économique 25, no. 2: Hoffman, E., K. MCCabe and V. Smith Reciprocity in Ultimatum and Dictator Games. An Introduction. Handbook of Experimental Economics Results. Amsterdam, Elsevier: Khan, U., and R. Dhar Licensing effect in consumer choice. Journal of Marketing Research 43, no. 2: Krumm, A., and A. Corning Who believes us when we try to conceal our prejudices? The effectiveness of moral credentials with in-groups versus out-groups. The Journal of social psychology 148, no. 6: Mazar, N., and C. Zhong Do green products make us better people? Psychological Science 21, no. 4: Merritt, A., D. Effron, and B. Monin Moral Self-Licensing: When Being Good Frees Us to Be Bad. Social and Personality Psychology Compass 4, no. 5: Miller, D., and D. Effron Psychological License: When it is Needed and How it Functions. Advances in experimental social psychology 43: Rabin, M Incorporating fairness into game theory and economics. American Economic Review 83, Sachdeva, S., R. Iliev, and D. Medin Sinning saints and saintly sinners. Psychological Science 20, no. 4:

8 TerraChoice The sins of greenwashing: Home and family edition. Acknowledgments We thank Martin Koums, Fosso Manuella and Marie-Gaelle Njambé for research assistance. We are also grateful to all participants in Montpellier and Nîmes. Appendix: Experimental instructions You are going to participate in an experiment about decision making. There is no right or wrong answer. The session should last about five minutes. Your answers will be treated anonymously. During this experimental session, you are requested to make decisions and you can earn money. Please note that during the experiment communication is not allowed. If you have questions, please raise your hand. We will answer your questions in private. You have received a closed envelope containing a questionnaire. This questionnaire is intended for the study of your decision-making. Please answer the most sincere as possible. First stage: (Good deed treatment only) During This questionnaire you will be randomly matched with another participant. This participant had voluntarily stated that he was ready to devote time to help Restos du Coeur to distribute meals to the needy. What do you think of this participant? Please circle the rating you give to his behavior Bad deed Good deed Second stage: (Good deed and Control treatments) You will earn money according to some procedure defined in the sheet if you are drawn lots. Your identity and that of the other participant will remain anonymous. This participant received an amount of money 30, to share with you. If you accept the offer that he had proposed to you, the transaction is carried out, and each of you will get the amount specified by him. If you reject his offer, neither he nor you get anything. Please indicate whether you agree or not an amount included in each of the following ranges: An amount between : I accept I refuse An amount between : I accept I refuse An amount between 9-6 : I accept I refuse An amount between 5-3: I accept I refuse An amount between 2-0 : I accept I refuse What is the minimum offer that you are willing to accept? 8