ABSTRACT

This chapter reviews the evidence for social preferences, and looks at how we can model them and what consequences they can have. There have been literally thousands of experiments suggesting that people have social preferences in one shape or another. The chapter begins with three games that show the nice side of social preferences. These games are: dictator game; proposer; and receiver game. As a slight aside: in general, we say that there is a social dilemma whenever there is a difference between the Pareto-efficient outcome, which captures what is best for the group, and the Nash equilibrium, which captures individual incentives. Care is needed in creating too much social distance, because it could leave subjects doubting the experiment is real. One possibility is to let team members interact face to face when reaching a decision. This slightly diminishes anonymity and when it comes to measuring social preferences this may not be a good thing.