Entitlements and Reciprocity
Katarína Danková
Department of Economics and Finance
Most of us would like to see a thief who stole our money punished. Usually, we rely on our legal system and police to
execute the punishment. However, if given the opportunity, would you want to punish the thief if you had to pay for such
punishment with your hard-earned cash?
Motivation:
The existence of reciprocity has been clearly
demonstrated in many laboratory experiments in which
subjects are usually endowed with some start up money.
Several studies point out that that people take such
windfall endowments less seriously when making
decisions. It is therefore possible that the existing
literature overestimates the extent of reciprocal behavior.
In my experiment I test whether earned endowments
lead to a weaker reciprocal response.
Experimental Design:
The experimental design involves a taking game in which
the first mover (FM) decides whether to Take or Not Take
$10 from the second mover (SM). The SM then decides
whether to punish FM by decreasing his payoff by $0, $4,
$8, $12, or $16. For every $4 that the SM destroys he
incurs a cost of $1 to himself.
Taking Game
• WINDFALL – the FM receives an endowment of
$10 and the SM receives an endowment of $18 after
which they immediately proceed to playing the taking
game.
The treatments differ in the source of the endowment
used for punishing. In the EARNED treatment the SMs
use their earned money whereas in the WINDFALL
treatment they use money given to them by the
experimenter.
Hypothesis:
In the EARNED treatment subjects will punish less than
in the WINDFALL treatment
FM
SM
Take
Not Take
Average
Punishment
EARNED
85.50%
19.50%
7.04
WINDFALL
91.20%
8.80%
3.00
–Subject Behavior
–SMs punishment decisions
Treatments:
The experiment consists of two treatments:
• EARNED – First, the SM can earn $8 by cutting
posters promoting NZEEL experiments. Then both the
FM and the SM receive a $10 endowment after which
they play the taking game. The FM decides whether
(s)he wants to take $10 from the SM or not. The SM
has a chance to decrease the FM’s earnings at a cost
to themselves.
Result:
Punishment in the EARNED treatment was statistically
significantly higher than in the WINDFALL treatment (pvalue = 0.012)
The results of the experiment are surprising: People are
more likely to use their earned cash to pay for
punishment than to use windfall money allocated to them
by the experimenter. This suggests that the existing
literature might actually be underestimating the extent of
reciprocal tendencies by experiment participants.