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Edward Lazear, Ulrike Malmendier, Roberto Weber
NBER Working Paper No. 12041
Issued in February 2006
NBER Program(s): LS
PE
---- Abstract -----
Experiments provide a controlled setting where factors can be isolated and studied more easily than in the field, but they often do not allow participants to sort into or out of environments based on their preferences, beliefs, and skills. We conduct an experiment to demonstrate the importance of sorting in the context of social preferences. When individuals are constrained to play a dictator game, 74% of the subjects share. But when subjects are allowed to avoid the situation altogether, less than one third share. This reversal of proportions illustrates that the influence of sorting limits the generalizability of experimental findings that do not allow sorting.
Moreover, institutions designed to entice pro-social behavior may induce adverse selection. We find that increased payoffs prevent foremost those subjects from opting out who share the least initially. Thus the impact of social preferences remains much lower than in a mandatory dictator game, even if sharing is subsidized by higher payoffs. Our experiment also sheds light on the motives for sharing. While much sharing is consistent with other-regarding preferences, the majority of subjects share without really wanting to, as evidenced by their willingness to avoid the dictator game and to even pay for avoiding it.
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This paper was revised on March 10, 2006 Machine-readable bibliographic record -
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