Journal of Mathematical Psychology 42, 248265 (1998)
Article No. MP981213
Social Influence in the Sequential Dictator Game 1
Timothy N. Cason and Vai-Lam Mui
University of Southern California
This paper introduces the sequential dictator game to study how social
influence may affect subjects' choices when making dictator allocations.
Subjects made dictator allocations of 840 before and after learning the allocation
made by one other subject in the Relevant Information treatment, or the
birthday of one other subject in the Irrelevant Information treatment.
Subjects on average become more self-regarding in the Irrelevant Information
treatment, but observing relevant information constrains some subjects from
moving toward more self-regarding choices. We also find that subjects who
exhibit more self-regarding behavior on their first decisions are less likely to
change choices between their first and second decisions, and the use of the
Strategy Method in this setting does not significantly alter choices. The relationships between our findings and the economic and psychological literature
regarding how social influence operates are also explored. 1998 Academic Press
1. INTRODUCTION
This paper introduces the sequential dictator game to study how social influence
may affect subjects' choices when making dictator allocations. In the dictator game,
each subject is paired randomly and anonymously with another subject, and one is
selected to ``dictate'' the allocation of a fixed amount of money. In the sequential
dictator game, subjects make two dictator decisions, and they receive information
regarding another subject's dictator allocation before making their second decision.
When making these two decisions, subjects are not making two dictator offers to
the same person.
If a subject's only goal is to maximize her earnings, then she should allocate the
entire surplus to herself. However, there is now overwhelming evidence that many
subjects give away a substantial share of the surplus. 2 Different explanations have
1
We thank Matt Grund for research assistance and the USC Zumberge Faculty Research and
Innovation Fund for financial support. We are also grateful to Gary Bolton, James Konow, Robert
Slonim, two anonymous referees, and participants at the Fall 1996 Economic Science Association conference for valuable comments. We retain responsibility for any errors.
2
For two surveys of the early literature on the dictator game and the related ultimatum game, see
Camerer 6 Thaler, 1995 and Roth, 1995; for more recent contributions see Hoffman, McCabe, 6 Smith,
1996; Bolton, Katok, 6 Zwick, 1997; and Cason 6 Mui, 1997.
0022-249698 25.00
Copyright 1998 by Academic Press
All rights of reproduction in any form reserved.
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SEQUENTIAL DICTATOR GAME
249
been advanced for this other-regarding behaviorfor example, the fairness
hypothesis (Forsythe, Horowitz, Savin, 6 Sefton, 1994) and the observer effect
hypothesis (Hoffman, McCabe, Shachat, 6 Smith, 1994)and these explanations
typically employ the idea that subjects care about both their monetary earnings as
well as about behaving in a socially appropriate way. 3 At a general level, these
explanations are based on the idea that subjects are maximizing a utility function
that includes both a monetary payoff and a social payoff, and this social payoff
depends on the extent to which subjects' choices conform to or deviate from what
they believe to be socially appropriate behavior.
While a subject's belief regarding what constitutes socially appropriate behavior
will depend on her personal characteristicsher experience, cultural background,
personalityit is plausible that this belief may also depend on her estimate of
others' beliefs regarding what constitutes socially appropriate behavior. Therefore,
when a subject is exposed to socially relevant information that may lead her to
revise her belief, her choice may change. This paper reports an experiment that
provides some preliminary tests of this social influence hypothesis. More specifically, we investigate whether learning the dictator allocation made by another subject in the same experimental session affects subjects' choices.
Other researchers have also conducted experiments in which subjects receive
information about others' choices. For example, several recent public goods
laboratory studies have examined whether group contribution levels change when
subjects receive information about the previous contributions of all individual subjects in their group (Sell 6 Wilson, 1991; Weimann, 1994; and Croson, 1995). 4
These experiments capture natural settings in which social influence may be significant. However, in these experiments a subject's monetary payoff depends on both
her own choice as well as others' choices. The presence of strategic interdependence
creates two difficulties for our purpose of testing for the impact of social influence.
First, even if one observes that a subject's behavior changes upon observing other
subjects' choices, it may be difficult to discern to what extent these changes are due
to social influence and to what extent they are caused by the fact that such information affects her strategic calculus when attempting to increase her monetary payoff.
Second, when strategic interdependence is present, subjects' beliefs regarding what
constitutes socially appropriate behavior may be influenced by the strategic
environment itself. Roth (1995) reviews recent efforts in studying how social norms
regarding what constitutes fair behavior in bargaining games can be created and
enforced. He observes that ``(a)lthough subjects may have clear ideas about what is
3
According to the fairness hypothesis, subjects are trying to behave fairly by taking what they consider to be their fair share. This hypothesis implies that subjects' choices are sensitive to their beliefs
regarding what is a fair allocation. According to the alternative observer effect hypothesis, subjects may
be concerned about whether their allocations are judged as unfair by the experimenter, so the experimenter as observer could increase other-regarding behavior. This hypothesis implies that subjects' choices are
sensitive to their expectation regarding what is perceived to be socially acceptable to the experimenter.
4
In a related public goods experiment, Andreoni (1995) finds that providing subjects with information
regarding how their earnings rank in comparison to the other subjects in their session decreases cooperation. In a ``trust game'' experiment, Berg, Dickhaut, 6 McCabe (1995) finds that providing subjects with
the full distribution of outcomes from previous sessions does not substantially affect their choices.
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fair in a variety of circumstances, and although these ideas about fairness may
influence the strategic environment, the evidence suggests that subjects adapt their
ideas about what is fair in response to their experience, in ways that may be heavily
influenced by strategic considerations.'' (Roth, 1995, p. 271).
Therefore, while social influence may arise naturally in many environments in
which strategic interdependence is important, in order to better isolate the impact
of social influence it is useful to ``go one step backward'' to study this issue in a
simple environment in which strategic considerations are absent.
Our experimental design includes two main treatments. In both treatments, subjects first chose an initial dictator allocation with no information other than the
instructions. The Irrelevant Information treatment serves as a baseline control, in
which subjects receive socially irrelevant information between their two dictator
decisions. In the Relevant Information treatment, each subject learns the first dictator allocation chosen by one other subject. Each subject then specifies a single
second dictator allocation to another subject who is different from the subject
affected by his initial dictator allocation.
Our major findings are as follows. Subjects on average become more self-regarding in the Irrelevant Information treatment, but do not become more self-regarding
in the Relevant Information treatment. We also find that subjects who are more
self-regarding on their first decisions are less likely to change choices between their
first and second decisions.
2. EXPERIMENTAL DESIGN AND PROCEDURES
Each subject made two decisions sequentially that corresponded to a dictator
allocation of 840. We employed the exchange framing for these decisions, in which
the decision-maker is a seller choosing a price that ranged between 0 and 40 dollars
(see Hoffman et al., 1994, for an experiment that examines the importance of this
framing). The buyer was required to buy at that price. If the seller chose a price of
P dollars, the buyer received 40-P dollars while the seller received P dollars, so the
seller dictated the allocation of the 840 surplus. Notice that when a seller chose a
higher price he is making a more self-regarding choice. In all cases price choices
were restricted to two-dollar increments (i.e., 80, 82, 84, ..., 838, 840). Each session
proceeded as follows:
1. All subjects chose an initial ``first price'' (P 1 ) with no information other
than the instructions. In the Irrelevant Information treatment, subjects also
indicated on their choice form the day of the month on which they were born (i.e.,
an integer between 1 and 31).
2. The experimenter drew bingo balls from a cage to assign subjects into
groups of four. For ease of exposition, call a typical group of four subjects 1, 2, 3,
and 4.
3. The experimenter transferred information within the odd-numbered and
within the even-numbered subjects in each group. In the Relevant Information
SEQUENTIAL DICTATOR GAME
251
treatment, subject 1 learned the initial price chosen by subject 3, and subject 3
learned the initial price chosen by subject 1. Information was similarly transferred
between subjects 2 and 4. In the Irrelevant Information treatment subjects instead
learned the birthday of this other subject.
4. All subjects then chose a ``second price'' (P 2 ).
5. Again using the bingo cage, the experimenter randomly determined
whether the odd-numbered subjects or the even-numbered subjects in each group
would be sellers, as well as which of these two selected sellers would be the ``first
seller'' and which the ``second seller.'' For example, if the odd-numbered subjects
were selected as the sellers and if subject 1 was selected as the first seller, then subject 1 received his indicated first price P 1 while his paired buyer subject 2 received
40-P 1 . In this case subject 3 must be the second seller, so subject 3 received his
indicated second price P 2 while his paired buyer subject 4 received 40-P 2 .
There are several key points to notice from this procedure. Subjects know that
one-half of them will be sellers and one-half of them will be buyers, but all fill out
choice forms indicating their choices as sellers. They also know that the selection
of which subjects play which role will be determined randomly only after they submit all their choice forms, and that there is a 25 percent chance that they will be
the first seller and a 25 percent chance that they will be the second seller. Since the
total amount to be divided is 840 (ex post) for each seller, ex ante the expected
money at stake in each decision is 0.25*40=810. Ten-dollar stakes are commonly
used in the dictator game literature, so our stakes and procedure generate monetary
incentives that are roughly consistent with previous research.
Notice also that the information exchanged before the second price choice is
between two subjects who will either both be sellers or both be buyers. The instructions explain this and emphasize that if a subject ends up being selected as a seller,
she exchanges information with a subject who cannot be a buyer; and that if a subject ends up being selected as a buyer, she exchanges information with a subject
who cannot be a seller. In other words, subjects exchange information with someone who makes choices that do not affect their own earnings.
Subjects were paid privately at the end of the session and never learned the identity of any other seller or buyer. A total of 100 subjects participated in the experiment: 40 in the Relevant Information treatment, 20 in the Irrelevant Information
treatment, and 40 in a supplementary Strategy Method treatment described later in
Section 4.3. Data were collected in five sessions. All subjects were recruited from
large economics principles courses. Subjects received 85 upon arrival at the classroom used for the experiment. The instructions (available from the authors upon
request) were read aloud by the experimenter while subjects followed along on their
own copy. To ensure that subjects understood how their price choices determined
their payoffs (and those of an anonymous subject) based on random draws at the
end of the session, the instructions included a detailed example that included randomly drawn pairings. We were concerned that the subjects might use the example
prices chosen by the experimenter as guides for what constitutes socially desirable
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behavior in this experiment. 5 In order to minimize this potential demand effect, the
experimenter selected example prices randomly using dice thrown in full view of the
subjects.
Although subjects only required a few minutes to make their decisions, these
extensive instructions (and time required to pay subjects) caused each session to
last almost one hour. Including the 85 appearance fee, subject payments ranged
from 85 to 845, with an average of 825. 6
3. HYPOTHESES
In our experiment, the majority (58 percent in the Relevant Information treatment and 70 percent in the Irrelevant Information treatment) choose a price less
than 840 in their first price choice. This is consistent with previous findings in the
literature. For those subjects who choose a price less than 840, it is reasonable to
interpret this as reflecting that they are maximizing a utility function that has both
a pecuniary and a social component. 7 For those subjects who are completely selfregarding and choose a price of 840, it is possible that some of them may still be
maximizing a utility function that has both a pecuniary and a social component,
but they decide that 840 is the choice that optimally balances the trade-off between
pecuniary and social considerations. But it is quite likely that some of the subjects
choose 840 because they are simply maximizing their monetary payoff, and they do
not regard any social considerations to be important in this setting.
For those subjects who care both about their monetary earnings as well as what
constitutes socially appropriate behavior, socially relevant information may affect
their beliefs and change their behavior. In particular, if subjects believe that the
choice made by another subject gives them useful information, then the availability
of information regarding choice made by another subject may change their beliefs
regarding what constitutes socially appropriate behavior. This can in turn change
their choices.
5
There is evidence in the psychological literature that people are more likely to conform to the
behavior or opinions of an individual who appears to have expertise or authority in a given situation
(Bushman, 1988). Since subjects were recruited from economics principles classes and knew that the
experimenter is a professor in the economics department, they may therefore look up to the experimenter
as a figure with authority, and hence use the illustrations chosen by the experimenter to guide their
behavior.
6
There is a straightforward alternative approach to test the importance of social influence in the dictator game. One could first provide different groups of subjects with different information regarding how
much another subject allocated in the dictator game. Then simply ask subjects directly what they would
allocate hypothetically in this setting, and compare responses between subjects who learn that others
had given less and who learn that others had given more. We do not adopt this hypothetical choice
approach here because in environments such as the dictator game, subjects may have incentives to misrepresent their true preferences if they are not paid based on their choices. For example, a subject may
believe that she will be perceived as a nice, fair person in the view of the experimenter by allocating onehalf of the total available stakes to herself. This social motivation is more likely to be an overriding concern if the subject is making a hypothetical choice (Forsythe et al., 1994, provide evidence on this point).
7
An alternative interpretation is that these subjects do not really understand the structure of the dictator game. However, given the simplicity of the dictator game and the observed behavior reported in
numerous experiments, this alternative interpretation seems implausible.
SEQUENTIAL DICTATOR GAME
253
However, it is possible that subjects may not change their beliefs upon learning
the choice made by one other subject, because they consider this choice as providing negligible information. Subjects may think that different people have different
notions regarding socially appropriate behavior in this context. Since the choice
made by another subject only provides information about a single individual's
notion regarding socially appropriate behavior, it may not be sufficient to induce
subjects to update their beliefs. 8 But a key finding in cognitive psychology is that
individuals attach undue weight to salient events or vivid information (Nisbett 6
Ross, 1980). If subjects regard the choice of another subject in the same decision as
salient or vivid, then subjects may still change their beliefs upon observing this
information.
One way to empirically test whether or not socially relevant information may
change subjects' observable choices would be to compare directly subjects' second
price choices to their first price choices in the Relevant Information treatment.
However, this may not be an entirely legitimate approach. It is plausible that the
mere fact that a subject receives some informationregardless of whether or not the
information is socially relevantmay cause a change between her first and second
choices. After receiving information, the subjects need to incur mental costs to process it and decide how to respond to it, including whether to ignore it altogether
(Walker 6 Smith, 1993). There is also the possibility that when subjects are asked
to make a second decision, they may change their choices because they have second
thoughts. For example, suppose that a subject decides to take less than the whole
surplus on her first choice. It is possible that when making her second choice, she
may reconsider whether or not she wants to be as other-regarding in her second
choice, which may cause her to make a more self-regarding allocation in her second
choice. Of course, reconsidering the choice may also lead her to make a more otherregarding allocation on her second choice.
Motivated by these observations, we introduced the Irrelevant Information treatment as a baseline control. 9 In the Irrelevant Information treatment, each subject
receives only information about the birthday of the subject with whom he is paired
(i.e., the day of the monthsimply an integer between 1 and 31). Since this information does not reveal the other subject's identity, nor does it contain any information regarding the other subject's age, gender, ethnicity, cultural, academic or
economic background, we believe it contains no socially relevant information. This
Irrelevant Information treatment allows us to control for the ``information-processing'' and ``second thought'' effects.
In addition to these two effects, a social influence effect potentially operates in the
Relevant Information treatment. Therefore, if the change between the second and
first choice is different in the Irrelevant Information treatment than the Relevant
8
Note that even if subjects change their belief upon observing socially relevant information, they may
not change their observed behavior. This can occur either because the change in their belief is too small
to justify the required mental costs for making a behavioral change, or because subjects are constrained
to make a discrete choice (i.e., in two-dollar increments between 80 and 840), which is too coarse to
reflect desired changes.
9
We are grateful to Robert Slonim for insightful comments related to this issue, and for helpful
suggestions that inspired the specific Irrelevant Information treatment adopted here.
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CASON AND MUI
Information treatment, this difference should be attributed to social influence.
Therefore, when testing whether socially relevant information will affect subjects'
choices, we compare the changes in behavior in the Relevant Information treatment
and the Irrelevant Information treatment, using the following null hypothesis:
The Zero Social Influence Hypothesis. The change between subjects' second
and first price choices in the Relevant Information treatment is not different from the
change between the subjects' second and first price choices in the Irrelevant Information treatment.
We also test an additional hypothesis that captures the idea that subjects' susceptibility to social influence may depend on the extent to which their first price choice
is self-regarding. When a subject chooses a relatively self-regarding allocation in her
first price choicethat is, something close to or even equal to 840this can either
reflect that her estimate of what constitutes socially appropriate allocation is close
to 840, or that she assigns a minimal (or zero) weight on the relative importance
of the social component of her utility function, or both. In either case, this subject
has a relatively strong preference for monetary earnings. Therefore, it is plausible
that this subject is less likely to have second thoughts when making her second
decision. Moreover, this subject may not find it worthwhile to incur the mental cost
to process the information provided to her between her two decisions. In the Irrelevant Information treatment, such subjects may find it relatively easy to simply
ignore the irrelevant information. In the Relevant Information treatment, these subjects may decide that it is not worthwhile to extract the social content embedded
in the observed first price choice of other subjects and adjust behavior accordingly.
Differential Social Influence Hypothesis. More self-regarding subjects are
less likely to select a second price choice that is different from their first price choice.
Finally, we test a third hypothesis that relates the likelihood that a subject
changes his choice to the content of the information he receives about the allocation
made by the other subject. It is mentally costly for a subject to process information
and decide whether he should change his behavior. It is therefore possible that if he
receives socially relevant information that is more dramatic, he is more likely to
change his behavior. We shall classify information as more ``dramatic'' if the
absolute difference between the subject's first price choice and the information he
receives about the other subject's first price choice is large.
Dramatic Social Influence Hypothesis. The larger the difference between a
subject's first price choice and the information received about the other subject's first
price choice, the more likely that the subject's second price choice will differ from his
first price choice. 10
10
It is natural to consider testing a more refined version of this hypothesis: that a subject's second
price choice moves in a direction toward the other subject's first price choice. We do not test this
hypothesis because our data do not allow us to distinguish this directional shift from a simple regression
to the mean. For example, suppose a subject takes all of the 840 on his first choice. It is therefore likely
that he observes another subject's first choice that is more other-regarding. If he changes his choice at
all, then he can only become more other-regarding on his second choice. The exact opposite pattern can
be observed among those subjects who initially select other-regarding first choices.
SEQUENTIAL DICTATOR GAME
255
4. RESULTS
4.1. The Zero Social Influence Hypothesis
Figure 1 presents the cumulative price choice distribution for the 20 subjects in
the Irrelevant Information treatment and the 40 subjects in the Relevant Information treatment. Figure 1A displays the first price choice, and Fig. 1B displays the
second price choice. In both treatments the modal price choice is 840, selected overall by 23 out of 60 subjects in their first decision (38 percent) and by 25 out of 60
subjects in their second decision (42 percent).
FIG. 1.
Cumulative price distribution on (A) first choice and (B) second choice.
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Our baseline for testing whether social influence matters is the Irrelevant Information treatment. The cumulative price choice distribution in the Irrelevant Information treatment exceeds the distribution in the Relevant Information treatment
for prices greater than 86 on the first price choice. However, these two first price
choice distributions are not significantly different (KolmogorovSmirnov (KS)
p-value=0.51), nor are their means significantly different (t=1.37). The second
price choice distributions and means in the two treatments are also not significantly
different (KS p-value=0.99 and t=0.06).
According to the Zero Social Influence Hypothesis, the change between subjects'
second and first price choices in the Relevant Information treatment is not different
from the Irrelevant Information treatment. We test this null hypothesis in two ways.
First, we compare the frequency at which subjects change their price choices in
both treatments. Second, we examine specifically how the first and second price
choices differ within each treatment.
This hypothesis receives considerable support in the first test that considers only
the frequency of price choice changes. Sixteen of the 40 subjects (40 percent) change
prices between their first and second decisions in the Relevant Information treatment, and they change their prices by an average of 811.75. Much to our surprise,
a larger fraction of subjects11 of 20 (55 percent)change prices between their
first and second decisions in the Irrelevant Information treatment, and they change
their prices by an average of 810.27. However, the frequency at which subjects
change choices in the Relevant Information treatment is not significantly different
from the rate in the Irrelevant Information treatment (Fisher's exact test (two-tail)
p-value=0.29).
The Zero Social Influence Hypothesis receives significantly less support in our
second test which examines how the first and second price choices differ within each
treatment. The two panels of Fig. 1 describe the price distributions for the first and
second choices. The same subjects select prices on the first and second choices, so
we cannot compare the distributions from the two panels in the same treatment
using standard distributional tests (such as the KolmogorovSmirnov test) that
require two independent samples. However, we can test for a significant change
across the two price choices by pairing the two prices made by each subject, and
evaluating whether the distribution of the difference in the two prices has a mean
that is significantly different from zero.
As shown on Fig. 1, the mean price choice in the Relevant Information treatment
falls from 831.1 to 830.7 between the first and second decisions. This difference
(&80.4) is not significantly different from zero (t=0.25; (two-tail) p-value=0.81).
By contrast, the mean price choice in the Irrelevant Information treatment increases
between the first and second decisions from 827.1 to 830.6. This difference (83.5) is
significantly different from zero (t=1.91; (two-tail) p-value=0.072), albeit at a
marginal significance level. Since this shift toward self-regarding behavior occurs
only in the Irrelevant Information treatment, it suggests that observing relevant
information constrains some subjects from moving toward more self-regarding
choices.
These differencesno change in other-regarding behavior in the Relevant Information treatment and a decrease in other-regarding behavior in the Irrelevant
257
SEQUENTIAL DICTATOR GAME
Information treatmentare also reflected in a classification of how many subjects
increase or decrease their price choices between their first and second price decisions. Table 1 shows that only 2 of the 20 subjects (10 percent) in the Irrelevant
Information treatment become more other-regarding by selecting a lower price
on their second decision, while 9 of the 40 subjects (23 percent) in the Relevant
Information treatment become more other-regarding. Nine of the 20 subjects
(45 percent) in the Irrelevant Information treatment become more self-regarding by
selecting a higher price on their second decision, while only 7 of the 40 subjects
(18 percent) in the Relevant Information treatment become more self-regarding.
The average amount that the subjects change their prices in all four of these cases
exceeds 810. This difference in the direction of change across treatments is statistically significant at the 8-percent level.
Conclusion 1. A comparison of the frequency at which subjects change their
price choices in the Irrelevant Information and Relevant Information treatments
provides support for the Zero Social Influence Hypothesis. However, subjects'
second price choices are more self-regarding than their first price choices on average
in the Irrelevant Information treatment. This shift toward self-regarding behavior is
not observed in the Relevant Information treatment, which provides evidence
against the Zero Social Influence Hypothesis.
Before conducting the experiment we expected that most subjects would not
change their second price choice from their first price choice in the Irrelevant Information treatment, but that more would change their choices in the Relevant Information treatment. Much to our surprise, a (insignificantly) greater percentage of
subjects changed their choices in the Irrelevant Information treatment. Recall that
the second thought and the information processing effects are operating in both
treatments. In the Irrelevant Information treatment the combined second thought
and information-processing effects cause subjects to become more self-regarding.
The result that subjects do not become more self-regarding in the Relevant Information treatment can be interpreted as follows. The introduction of socially relevant informationthrough its impact on subjects' beliefsinduces some subjects to
shift toward other-regarding behavior in the Relevant Information treatment. But
this social information impact appears just sufficient to offset the combined second
thought and the information-processing effects.
TABLE 1
Frequency of Shifts in Other-Regarding and Self-Regarding Direction by Treatment
Irrelevant information
Relevant information
Total (column)
Own second
price<Own
first price
No change
between first
and second price
Own second
price>Own
first price
Total (row)
2
9
11
9
24
33
9
7
16
20
40
60
Note. Fisher's exact test (two-tail) p-value=0.08.
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CASON AND MUI
Conclusion 1 indicates that the evidence regarding the Zero Social Influence
Hypothesis is mixed. This could be due, in part, to subject heterogeneity; e.g., some
subjects may respond to socially relevant information, while others do not. In the
next subsection, we examine this heterogeneity directly, by identifying some characteristics of subjects who are more likely to change price choices between their first
and second decisions.
4.2. Differential and Dramatic Social Influence Hypotheses
According to the Differential Social Influence Hypothesis, more self-regarding
subjects are less likely to select a second price choice that is different from their first
price choice. Table 2 indicates that this hypothesis receives considerable support in
both treatments. Subjects who select a first price of 840 are significantly less likely
to change price on their second choice. For example, in the Relevant Information
treatment only 3 of the 17 subjects who chose a first price of 840 changed their
price on their second choice, while 13 of the 23 subjects who chose a first price less
than 840 changed their price on their second choice. These differences are highly
significant, and are also highly significant in the Irrelevant Information treatment. 11
Table 3 presents an alternative test of this hypothesis using a probit model. This
model estimates the likelihood that a subject changes her price between her first
and second price decisions as a function of her first price choice. The negative and
significant coefficient estimates reported in columns (1) and (2) on the first choice
variable indicate that more self-regarding first price choices reduce the likelihood
that a subject changes her price between her first and second price choices.
Conclusion 2. Subjects who exhibit more self-regarding behavior on their first
price choice are less likely to change prices between their first and second decisions.
Finally, we test the Dramatic Social Influence Hypothesis, which states that more
dramatic information is more likely to cause subjects to change their price choices.
Subjects learned the actual price choice made by another subject only in the Relevant Information treatment, so we test this hypothesis for this treatment only.
Information is more dramatic if the difference between the subject's own first price
choice and the other subject's first price choice is large. The median absolute difference between these two choices was 810, so we define information received by a
subject as dramatic when the absolute difference between her first price choice and
her paired subject's first price choice is larger than or equal to 810 (that is, |own
first choice-paired subject's first choice| 810).
Eleven of the 22 subjects (50 percent) who observe dramatic information change
their price choice between their first and second decisions, and they change their
price by an average of 813.50. By contrast, only 5 of the 18 subjects (28 percent)
who observe non-dramatic information change their price, and they change their
11
Alternative definitions to classify subjects into self-regarding and other-regarding groups give very
similar results; e.g., classifying a subject as other-regarding if he selected a price less than or equal to the
median first price in that treatment.
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SEQUENTIAL DICTATOR GAME
TABLE 2
Frequency of Changes in Price between the First and Second Choices, by Initial Choice
Change price between first Do not change price between
and second choices
first and second choices
Total (row)
Relevant information a
First price=840
First price<840
Total (column)
3
13
16
14
10
24
17
23
40
6
3
9
6
14
20
Irrelevant information b
First price=840
First price<840
Total (column)
a
b
0
11
11
Fisher's exact test (one-tail) p-value=0.014.
Fisher's exact test (one-tail) p-value=0.002.
price by an average of 88.00. The difference in the rate the these groups change
prices is not quite statistically significant (Fisher's exact test (one-tail) p-value=
0.135). We also augmented the probit model in Table 3 to include the absolute
difference variable |own first choice-paired subject's first choice|. As shown in
columns (3) and (4), the coefficient on this variable has the predicted positive sign,
but is not significantly different from zero.
Conclusion 3. Subjects who receive dramatic information are not significantly
more likely to change their price choice between their first and second decisions.
TABLE 3
Estimates of Change Likelihood Model (Probit Model Maximum Likelihood Estimation)
Irrelevant information
(1)
(2)
First price choice
(Standard error)
| Own first priceother's first price |
(Standard error)
Intercept
(Standard error)
&0.106 b
(0.042)
&0.036 b
(0.021)
3.062 b
(1.209)
Observations
Log-likelihood
Restricted (slopes=0)
Log-likelihood
Variable or statistic
Relevant information
(3)
(4)
0.027
(0.025)
&0.033 a
(0.022)
0.015
(0.027)
0.864
(0.679)
&0.538
(0.337)
0.597
(0.826)
20
&8.97
40
&25.34
40
&26.34
40
&25.17
&13.76
&26.92
&26.92
&26.92
Note. Dependent variable=1 if change offer; dependent variable=0 otherwise.
a
Denotes significantly different from 0 at 10 percent level.
b
Denotes significantly different from 0 at 5 0 level (one-tailed tests, except for Intercept).
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4.3. A Strategy Method Hypothesis and Results
We conclude this section with a brief presentation of a supplementary Strategy
Method Hypothesis and results. Experimental economists have recently begun to
use the strategy method to elicit subject choices (for example, Selten 6 Buchta,
1994; Straub 6 Murnighan, 1995). In this method, subjects specify a complete
strategy, rather than only choosing an action in realized information sets. Therefore, in the Strategy Method treatment implemented here, subjects received no
information between their two price decisions. After submitting their first price, subjects filled out a second form specifying a complete price choice strategy contingent
on all 21 possible first choice prices selected by the subject with whom they were
randomly paired. The instructions included an extensive example and emphasized
that these contingent price choices were binding and that one would be carried out
depending on the first price choice of another anonymous subject. Forty additional
subjects participated in this treatment.
We examined this strategy method approach in the sequential dictator game by
evaluating the following null Strategy Method Hypothesis: Choices in the Strategy
Method treatment are not different from choices in the Relevant Information treatment.
Roth (1995) points out that there are at least two reasons why subjects might
give different responses in the strategy and non-strategy methods. First, in the
strategy method, subjects are required to simultaneously make all potential choices
at the same time. When the game is sufficiently complex, for example, when it has
many information sets and substantial strategic interdependence, the transformation to the strategy method amounts to a significant change in the representation
of the strategic environment. Our sequential dictator game is extremely simple and
strategic interdependence is nonexistent, however, so this effect is probably absent.
Second, in the strategy method subjects are required to submit the complete
allocation strategies contingent on every possible choice by another subject. Consequently, there is a reduced incentive to think carefully about every possible element
of the strategy. This could lead to more variance in choices in the Strategy Method
treatment (Walker 6 Smith, 1993). For example, subjects can reasonably expect
that the likelihood that the first subject chooses a very other-regarding first price
such as 82 is very low, so the expected payoff consequences for their price choice
contingent on another first price of 82 is also very low. This second effect is likely
to be important in the sequential dictator game.
Besides these reasons, additional psychological considerations may cause subjects
to behave differently under the two methods. Psychological research indicates that
individuals attach too much weight to salient or vivid events and too little weight
to non-salient events. Events that do occur are more real and immediate, and hence
more concrete than the corresponding potential events that could have occurred.
The greater salience of events that have actually occurred are more available for
inference than events that have not occurred (Nisbett 6 Ross, 1980). Information
provided in the Relevant Information treatment is based on choices that have in
fact been made by another subject, rather than on choices that could have been
made by others. This information is therefore more likely to have an impact on subjects' choices because of its vividness.
SEQUENTIAL DICTATOR GAME
261
We tested the Strategy Method Hypothesis by comparing the first price choices
in both treatments. We also compared the second price choices in the Relevant
Information treatment with the realized second price choices in the Strategy
Method treatment (i.e., the realized second prices that were contingent uponand
thus determined bythe actual first price choice of the randomly-paired other subject). In no cases are the distributions, means, or fraction of subjects choosing 840
significantly different, so we conclude that use of the Strategy Method in this setting
does not significantly alter choices. 12 This finding suggests that it is appropriate to
pool the data in the Strategy Method and the Relevant Information treatments
when testing the social influence hypotheses. All of the results presented above are
qualitatively unchanged after pooling the data. In some cases, the results become
more statistically significant because of the larger sample size. For example, the
result that subjects in the Irrelevant Information treatment shift more in the selfregarding direction (shown in Table 1) compared to the pooled Relevant InformationStrategy Method data is significant at the 2-percent level.
5. DISCUSSION
In this experiment subjects made dictator allocations of 840 before and after
learning the allocation made by one other subject in the Relevant Information
treatment, or before and after learning the birthday of one other subject in the Irrelevant Information treatment. Subjects on average became more self-regarding in
the Irrelevant Information treatment, but did not become more self-regarding in the
Relevant Information treatment. We also observe that subjects who exhibit more
self-regarding behavior on their first decisions are less likely to change choices
between their first and second decisions.
Ever since the classic study on conformism by Asch (1951), psychologists have
been concerned about discerning possible channels through which social influence
occurs in different settings. In the Asch experiment, subjects were first shown a
straight line and then three lines for comparison. Subjects were then asked to
indicate which of these three comparison lines was closest to the first line in length.
Each subject was placed in a group consisting of five to seven confederates of
the researcher. The confederatesmost of whom provided responses before the
subjectgave the same wrong answer. A significant number of subjects conformed
to the incorrect answer provided by the confederates.
Inspired by the Asch experiment and follow-up studies, two explanations have
emerged as the principal mechanisms of social influence (Deutsch 6 Gerald, 1955).
First, people may change their behavior upon observing how others behave in
similar situations in order to obtain certain rewards or avoid potential punishments. For example, it is highly plausible that subjects in the Asch experiment
conform to the view of the majority because they want to be accepted by the
12
The one relatively minor difference between the Strategy Method and Relevant Information treatments is the rate of price changes between the first and second choices. Twenty-seven of 40 subjects
change prices in the Strategy Method treatment, while 16 of 40 subjects change prices in the Relevant
Information treatment (Fisher's exact test (two-tail) p-value=0.03).
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majority or to avoid the discomfort for disagreeing with the majority. Besides this
normative influence, social influence can also occur through informational
influence. When individuals are not completely certain about what is the right
behavior in a particular context, they may regard others' choices in similar situations as sources of useful information. 13
In our experiment, we believe that the main source of social influence is informational influence rather than normative influence. Since a subject's choice is not
observed by other subjectsespecially the subject whose choice he learns in the
experimenta subject does not need to be concerned about any potential
embarrassment for not conforming to what he conjectures to be the ``appropriate''
behavior of others participating in the experiment. 14
This distinction between the normative and informational influences as different
sources of social influence raises the natural question of whether social influence has
permanent effect on people's behavior. As psychologists have long emphasized,
when social influence operates mainly through informational influencethat is,
when knowledge about others' behavior causes an individual to change her belief
regarding what constitutes the appropriate or correct behaviorit is more likely
that social influence will have a long-lasting effect on people's behavior (Aronson,
1995, Chapter 2). On the other hand, when social influence operates mainly
through normative influencefor example, when an individual conforms to others'
behavior in order to avoid embarrassmentthen it is less likely that social influence
will have a permanent effect. 15
For example, in the Asch experiment, the incidence of conformism varies
significantly across treatments when the level of privacy is varied. In the original
treatment, having observed the choices of others, a subject provides his response
verbally in the presence of the entire group. Later research discovered that in
treatments in which subjects make their responses privately, the rate of conformism decreased considerably (Deustch 6 Gerald, 1955; Argyle, 1957). In contrast,
in other studies of social influence in which arguably, social influence operates mainly through informational influence, many subjects exhibited permanent
13
In the Asch experiment, the lengths of the lines are such that it would be extremely easy for subjects
to identify the correct answer. Given the simplicity of this cognitive task, it is quite unlikely that informational considerations can be the main source of social influence. However, when the tasks involved
require subjects to make decisions that are (partially) affected by their belief regarding what constitutes
socially appropriate behavior as in this experiment, or when the task is cognitively demanding, one
would expect that informational considerations become more important.
14
We note, however, that since a subject's choice is observed by the experimenter it is plausible that
a subject may be concerned about whether such behavior will be judged favorably or unfavorably by the
experimenter (the observer effect). But the observer effect is also present when a subject makes his first
price choice in all treatments, so any change that may occur in his second choice is unlikely to be
explained by the observer effect alone.
15
Without going into details, we note that the difference in fact is more subtle than we characterize
in the text. It is possible that an individual is motivated by normative influence to follow the behavior
of others originally. However, having made the ``appropriate'' changes in his behavior, he may eventually
adjust his own belief to make it consistent with his new choices. Once such internalization of beliefs has
occurred, the new belief may become independent of its source and will become extremely resistant to
change.
SEQUENTIAL DICTATOR GAME
263
changes in their beliefs (see, for example, Newcomb, Koenig, Flacks, 6 Warwick,
1967).
In the past two decades, economists have come to recognize better the importance of social influence in affecting economic decisions. For example, Akerlof
(1980) develops a formal model of social custom and uses it to provide an explanation for equilibrium involuntary unemployment. Drawing on the findings of
organizational theorists and social psychologists, Jones (1984) and Levine (1991)
have both argued that workers have propensities to choose their work efforts in
conformism to the work norms in their work group, and explore the implications
of this observation for the study of organizational design and wage dispersion.
Banerjee (1992) and Bikhchandani, Hirshleifer, 6 Welch (1992) show how informational cascades can lead to conformity behavior arising from purely informational
reasons. By contrast, Akerlof (1983) and Jones (1984, Chapter 5) present economic
models that focus on how people's experience can change their beliefs permanently. 16
The above observations regarding the two different channels through which
social influence operates suggest the need to investigate further the dynamic aspects
of social influence in economic settings. For example, a person's choices with regard
to how much to give to charity, or whether to behave more or less cooperatively
in bargaining situations, are affected by both his belief regarding what constitutes
appropriate behavior in these situations, as well as the economic and social incentives he faces in a particular situation. Society as a whole invests substantial
resources in shaping people's beliefs through its educational, social and religious
institutions, and some business organizations also expend resources to cultivate a
corporate culture that they believe will enhance employee loyalty, cooperation and
productivity. Given the importance of these social influence activities, it is important that economists conduct future theoretical and field studies as well as
laboratory experiments to determine under what conditions these influences have a
permanent effect on beliefs and economic behavior.
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Received: January 28, 1998