Is Homo Economicus a Five Year Old?

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Is Homo Economicus a five year old? Yoella Bereby-Meyer Shelly Fisk Ben Gurion University of the Negev Monday, August 24, 2009 Running Head: Fairness perception Mailing addresses Yoella Bereby-Meyer Dept. of Psychology Ben Gurion University Beer Sheva 84105, Israel yoella@bgu..ac.il This research was supported by the Israel Science Foundation grant number: 146/05 Electronic copy available at: http://ssrn.com/abstract=1460482 Abstract Standard economic models assume that people exclusivel
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  Electronic copy available at: http://ssrn.com/abstract=1460482   Is Homo Economicus a five year old? Yoella Bereby-MeyerShelly Fisk   Ben Gurion University of the Negev Monday, August 24, 2009Running Head: Fairness perception Mailing addresses Yoella Bereby-MeyerDept. of PsychologyBen Gurion UniversityBeer Sheva 84105, Israelyoella@bgu..ac.il This research was supported by the Israel Science Foundation grant number: 146/05  Electronic copy available at: http://ssrn.com/abstract=1460482 Abstract Standard economic models assume that people exclusively pursue material self-interests in social interactions. However, fairness considerations and factors such astrust and reciprocity affect behavior. This study examined whether negativereciprocity (punishment for unfair division) develops during childhood.Kindergarteners, second graders and sixth graders played a mini-Ultimatum Gameagainst a human proposer or a random machine and a Dictator Game.Kindergarteners behave according to the standard economic model and show nofairness considerations. Evidence for negative reciprocity emerged by age seven.Thus, fairness considerations are not inborn but rather, develop with age.  Standard economic models assume that people are self-interested who seek tomaximize their monetary pay-offs in social interactions. However, fairnessconsiderations and factors such as trust and reciprocity do affect behavior.People value outcomes that fit their expectations about fairness and strongly disfavoroutcomes which deviate from them (Lowenstein, Thompson & Bazerman, 1989).They tend to reward others' cooperative behaviors, while punishing the uncooperative,even when these actions of reward or punishment are costly to them (Rabin, 1993).Such fairness preferences help achieve and maintain cooperation in human societies.This study examines changes in sensitivity to fairness with age. We focusedon negative reciprocity, i.e., a person's tendency to take costly actions that harmanother because he/she perceived the other's intentional behavior  as harmful (Cox,2004). Currently, little is known about the developmental srcins of fairnesspreferences (Fehr, Bernhard & Rockenbach, 2008) and specifically, about the srcinof negative reciprocity.In our study, participants played the Ultimatum Game -- a two-player gameoften used to study fairness. Players are randomly assigned the role of proposer orresponder. The proposer divides a sum of money between him/herself and theresponder. The responder must decide whether to accept or reject the proposeddivision. If accepted, the money is divided accordingly. If rejected, neither playerreceives anything. The rational economic model dictates that the responder shouldaccept any proposal greater than zero, and the proposer should offer the smallestpossible amount of money. Empirical evidence contradicts this prediction. Individualsdo consider fairness in their offers and choices.Proposers, on average, ask for less than 70% of the total sum. Respondersoften reject profitable, but unequal, offers (Guth, Schmittberger & Schwarze, 1982).  They are willing to pay to punish their opponent if he/she asked for too much.However, when the unfair offer was a result of a random device, a lower rejection rateof unfavorable outcomes was found (Blount, 1995).Much of the deviation from the rational model results from proposers' strategicconsiderations, as evident by differing results between the Ultimatum Game and itsvariant, entitled the Dictator Game, in which the responder cannot reject an offer(Forsythe, Horowitz, Savin & Sefton, 1994).Previous studies on children's fairness behavior when playing the UltimatumGame have shown that children's tendency to reject unfair offers increases with age(eg., Murnighan & Saxon, 1998). However, it is not clear whether children aim toreciprocate and punish their opponent.If children consider reciprocity, their behavior should depend on their partners'intentional actions. Consequently, in the Ultimatum Game we compared children'sresponses to proposals made by a human proposer (towards whom reciprocity issensible) to their responses to proposals from a random device. The differencebetween these two conditions as a function of age informs us on the development of negative reciprocity.  Experiment: Participants: Fifty-eight kindergarten children (5 year old), 52 second graders (8 yearold) and 57 sixth graders (12 year old) participated in the experiment.   Design: The experiment consisted of 4 conditions: proposer in the ultimatum game(PUG), proposer in the dictator game (PDG), responder in the ultimatum game with ahuman proposer (RUG), responder in the ultimatum game with a random device(RUGR).
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