Understanding Social Preferences

Departures from self-interest in economic experiments have recently inspired models of “social preferences.” Gary Charness discusses a range of simple experimental games that test these theories more directly than existing experiments. Experiments show that subjects are more concerned with increasing social welfare—sacrificing to increase the payoffs for all recipients, especially low-payoff recipients—than with reducing differences in payoffs (as supposed in recent models). Subjects are also motivated by reciprocity: they withdraw willingness to sacrifice to achieve a fair outcome when others are themselves unwilling to sacrifice, and sometimes punish unfair behavior.