Study finds social interaction before economic transactions raises fairness

Elliot Berkman
Elliot Berkman, UO psychology

A little social time is enough to increase fairness and more compassionate acceptance of a defection among strangers who engage later in economic interactions, says University of Oregon psychologist Elliot T. Berkman.

For a paper published March 19 in the open-access journal PLOS ONE, Berkman and three Russian co-authors, staged a series of games in which theoretical models of behavior from the field of social psychology were blended in with standard decision-modeling techniques from behavioral economics.

"People’s economic decisions are nearly always embedded in a social context," said Berkman, an assistant professor of psychology and director of the department's Social and Affective Neuroscience Lab. "We wondered, to what extent does that context influence their decisions, if at all?"

The experiments were conducted at the Skolkovo Institute of Science and Technology. Mikhail Myagkov, a UO professor of political science and senior scholar at the institute located near Moscow, and Evgenia Lukinova, a postdoctoral fellow at Skoltech and former UO doctoral student, led the project. Each experiment included students taken from a pool of 96 who did not previously know each other.

Mikhail MyagkovThe idea, Myagkov said, was to explore psychological features of sociality that have evolved in the brain to encourage people to cooperate in everyday contexts such as in politics, business and social engagements. "You might ask, 'Why is it more fun to drink beer together with a friend than separately?' What are the implications of that answer in terms of how society works and develops successful collective action?"
Participants played two computer-based economics games against other participants in their group or in a group of strangers: the prisoner's dilemma game, an interaction that finds whether people in an uncertain situation will be cooperative or competitive; and the ultimatum game in which one player chooses how to split $10 and the other player can accept the offer, even if it is unfair, or reject the offer, causing both players to receive nothing.

Before they played the games, participants took part in a socialization exercise in which they learned something about each other rejoining larger groups.

"Merely engaging in a brief group-based social interaction changes how people play the game with others, even when they’re playing anonymously," said Berkman, who helped design the study. "People make more generous offers. People are willing to accept unfair offers, instead of rejecting them, which leads to a cycle where fairness becomes the norm. When people don’t socialize, costly punishment is more common and people, on average, earn less."

Usually, Berkman noted, participants tend to reject unfair an offer "even though it is strictly irrational to do so because even if the partner offered only $1 the alternative is to get nothing."

"The rational thing to do is accept the $1 even though it's unfair. However, people generally reject unfair offers — a phenomenon known as costly punishment because you punish the opponent for making an unfair offer," he said, adding that the logic for such rejection is to encourage more fair offers in a subsequent game. "However, people still reject unfair offers even if they are playing single-shot games with people anonymously, where there is no logical reason to reject unfair offers."

Social interaction — for as little as five minutes — changed the game, fostering a sense of group identity, he said. "The increase and maintenance in cooperation and the greater tolerance of occasional bad behavior shifted the group norm from one to mistrust and competition to one of trust and cooperation."

The Skokovo Institute funded the study in collaboration with the UO.

—By Jim Barlow, Public Affairs Communications