FOUR ESSAYS ON THE ECONOMICS OF PRO-SOCIAL BEHAVIORS LI JINGPING NATIONAL UNIVERSITY OF SINGAPORE 2013 FOUR ESSAYS ON THE ECONOMICS OF PRO-SOCIAL BEHAVIORS LI JINGPING (B.Econ., Fudan University; M.A., NUS) A THESIS SUBMITTED FOR THE DEGREE OF DOCTOR OF PHILOSOPHY DAPARTMENT OF ECONOMICS NATIONAL UNIVERSITY OF SINGAPORE 2013 DECLARATION I hereby declare that this thesis is my original work and it has been written by me in its entirety. I have duly acknowledged all the sources of information which have been used in the thesis. This thesis has also not been submitted for any degree in any university previously. Li Jingping 25 November 2013 i Acknowledgment I am deeply grateful to my supervisors Associate Professor Anthony CHIN Theng Heng and Associate Professor Yohanes Eko Riyanto. A/P Anthony is most encouraging and supportive for my PhD study and research. His emphasis on the practical use of academic research is a continuous reminder for me in the future academic career. I am also indebted to A/P Riyanto, without whom I would not have started to pursue the PhD degree. His patience guidance and deep knowledge in the field has been an indispensable help during my PhD years. I would like to express my sincere gratitude to him. It is my honor to be under his supervision. I thank my fellow office mates in National University of Singapore: Qian Neng, Li Yunong, Wang Peng, Wang Ben, Vu Thanh Hai, Xie Huihua, Long Ling, Liu Zhengning, and Zhou Yingke, for the mutual support in good times or bad. Special thanks are extended to Lu Yunfeng, for many stimulating discussions on on-going projects and many other “cheap” but promising ideas. I owe my loving thanks to my parents. Though far away, their trust and understanding are a great comfort even when the journey is not even. I would also like to thank my newly wedded husband, who decided not to marry me until my PhD thesis is about to finish. Up to this day, I believe it is a wise decision. The most heartfelt thanks be to God, who is faithful yesterday, today, and tomorrow. ii Table of Contents Summary vi List of Tables viii List of Figures .x Chapter One: Category Reporting in Charitable Giving: An Experimental Analysis .1 1. Introduction 2. Overview of the Literature .5 2.1 The Publicity Effect 2.2 The Category Effect 3. Experimental Design and Procedure 11 3.1 Experimental Design .11 3.2 Experimental Procedure 16 4. Experimental Results .18 4.1 The Performance of category reporting 19 4.2 Disentangling the Category Effect from the Publicity Effect .21 4.3 The Clustering of Donations around the Category Threshold 25 4.4 The Effect of Increasing the Category-Threshold Level 27 5. Conclusion .29 6. Appendix 32 iii 6.1 The Seating Plan and Disclosure Methods .32 6.2 The Online Donation Process .34 6.3 Experimental Instructions .36 Chapter Two: Gender Differences in Image-Seeking Preferences 76 1. Introduction 76 2. Related Literature .79 3. Experimental Design 82 4. Experimental Results .85 4.1 On Donation Amounts 86 4.1.1 Between-Gender Analysis .89 4.1.2 Within-Gender Analysis 90 4.2 On Star Donor Probability 93 4.2.1 Between-Gender Analysis .93 4.2.2 Within-Gender Analysis 95 5. Conclusion .95 Chapter Three: Punishing the “Wrong-doer” or Compensating the “Victim”: An Experiment .98 1. Introduction 98 2. Related Literature .101 3. Experimental Design 103 iv 3.1 Treatments .105 3.2 Procedures .106 4. Experimental Results .108 4.1 Punishment and Compensation .108 4.2 The Norms of Intervention 117 4.3 Individual Heterogeneity 125 5. Conclusion .127 6. Appendix 130 6.1 Additional Tables and Figures .130 6.2 Experimental Instructions .141 Chapter Four: Altruism and Reciprocity: Intra-Social Preferences 156 1. Introduction 156 2. Experimental Design 159 3. Experimental Results .161 4. Conclusion .166 5. Appendix 168 5.1 Additional Tables 168 5.2 Experimental Instructions .169 Bibliography .182 v Summary This dissertation is composed of four experimental studies on the economics of pro-social behaviors. The first two essays focus on a donation-soliciting strategy known as category reporting. Using category reporting, charities publicly announce individual donations according to pre-specified categories ranked by the size of donations. Chapter explores on the mechanism that allows this strategy to be more effective than other donation plans. We show that category reporting is superior due to the dual presence of the publicity effect and the category effect. The publicity effect arises because donors are given public acknowledgement when qualifying for the category. This gives prestige. The category effect arises because the category provides a subtle reference donation point. Our experiment disentangles these two effects and shows that, when the threshold is low, the category effect is more salient than the publicity effect. Otherwise, the reverse is true. This suggests that when prestige is costly, individuals are willing to pay for it and the pursuit for prestige can be one of the motivations of charitable giving. Chapter differs from Chapter in that it focuses on the gender differences in their responses to category reporting. We show that women's average donations vary little with the category level or the publicity channel, but not men. Men give much more than women when the generous giving behavior could be known to others, and they give much less than women when such behavior remains private. Compared to women, men value a generous image and conform more to the profile of "image-seeker" in charitable giving. . In Chapter 3, we study the distributive preferences of an unaffected third party vi within a group by allowing him to directly affect the payoff of a passive recipient. Upon observing a dictator’s allocation to a recipient in a dictator game, the third party can punish the dictator and/or compensate the recipient. We find that compensation is preferred to punishment as a means of third-party intervention. On average, the subjects have a higher propensity to compensate and spend more on compensation than on punishment conditional on the amount the dictator transfers. Furthermore, there are two common triggers of third-party punishment and compensation: inequality in payoffs between the third party and the relevant reference player, and violation of the fairness norm. The fairness norm is more salient than the inequality aversion norm. We also find a high degree of individual heterogeneity in the subject pool. About 85% of subjects can be categorized as own-payoff maximizers, unconditional interveners, or conditional interveners. In Chapter 4, we evaluate an individual’s budget allocation between himself and two different recipients. In particular, we examine how the availability of another option to express one’s social preferences affects his existing expression. We find that people behave as if they have a fixed budget to allocate between one-self and other beneficiaries. Different beneficiaries and types of social preferences are considered to be irrelevant in determining the overall proportion of wealth allocated to others. Interestingly, when we further zoom in into the nature of this other regarding behavior, we find that people not treat different beneficiaries and types of social preferences differently. There is no evidence of crowding out of the existing other-regarding decision when an additional option to express other-regarding concern is available. vii List of Tables Table 1.1 The 2x2 Experimental Design .13 Table 1.2 Summary of Statistics .13 Table 1.3 The Publicity Effect 24 Table 1.4 The Clustering Effect of Donations around the Category Threshold 26 Table 2.1 The 2×2 Experimental Design 84 Table 2.2 Summary of Statistics .86 Table 2.3 Regression Results 88 Table 2.4 Between-Gender Treatment Effects 90 Table 2.5 Within-Gender Treatment Effects (Mann-Whitney Tests) 91 Table 2.6 Within-Gender treatment Effects (Regression Analysis) 92 Table 3.1 Experimental Design .106 Table 3.2 Regression Analysis 113 Table 3.3 Individual Heterogeneity .125 Table 3.A1 Summary of Statistics of Intervention Levels 130 Table 3.A2 Mann-Whitney Tests on Intervention Levels .131 Table 3.A3 Summary of Statistics of Conditional Intervention Levels 132 Table 3.A4 Mann-Whitney Tests on Conditional Intervention Levels .133 Table 3.A5 Slopes of Individual Intervention Curves in TPP and TPC (Dictator’s Transfer [0,20]) .135 viii Stage One In Stage One, Player A will decide how many points out of his/her given endowment he/she wants to pass on to you. Player A can pass point, 10 points, 20 points, 30 points, 40 points, 50 points, 60 points, 70 points, 80 points, 90 points or 100 points to you. Player A will keep the remaining points not passed on to you. The points that Player A decides to pass on to you (Player B) will be TRIPLED in value when they reach you. Stage Two In Stage Two, you have the initial 100 points plus the TRIPLED points from Player A. as Player B, you have to decide: z How many points out of total points in your possession you want to pass back to Player A? These points will be added onto Player A’s earnings. z How many points out of total points in your possession you want to donate to a charity? We will give brief information about this chosen charity to you shortly. You will keep the remaining points after deducting the points you allocate in decision and above as your own earnings. You will make these decisions in a “planned” manner, which means you will make a complete “decision plan” conditional on Player A’s potential decisions, even before you know Player A’s actual decision. Once Player A has made his/her “pass on” decision, his (her) decision will be matched to your correspondence decision. You will then know how many points you received from Player A and the corresponding points you decide to pass back to Player 173 given the amounts you received from Player A from your “decision plan” you have made earlier. Note that, Player A does not know that you have an option to donate to a charity. The Charity The charity chosen as the beneficiary of this study should you want to donate is a well-known international charitable organization “Doctors without Borders”. “Doctors without Borders” is a secular humanitarian-aid non-governmental organization best known for its projects in war-torn regions and developing countries facing endemic diseases. We will show you a short video clip about this charity. Be assured that you are doing a real donation! At the end of the session, we will tally the total amount of each individual donation you have made and donate this total amount online through internet. You will witness the whole process of donation, and know that it is you who make the contributions. We will show you the confirmation from “Doctors without Borders” on the screen. Earnings from the Game Based on the above two stages, your earnings are calculated in this way: Your earnings = + 100 endowment points + Three times the points passed to you from Player A − Points you give back to Player A − Points you donate to the charity 174 The conversion rate for earnings is 10 points for Singapore Dollar. You will be paid in cash at the end of the session privately. Please fill in the claim card with your ID and Password and bring it for payment collection. There will be a few control questions to test your understanding of the game before you proceed to the real decision. If you have any questions at this moment, please raise your hand and we will attend to you privately. 175 Instructions for the Trust Game (Player B) Instructions Welcome to this study on decision making! Before we start, please turn off your mobile phone and follow this instruction sheet closely while we are reading it out loud. It is crucial for you to understand the game before it starts. General Information In this study, there is a one-round decision making exercise which will last for about one hour. There are two players in the game, Player A and Player B. All Player As are placed in one room, and all Player Bs are placed in another room. Each player A will be randomly matched with a Player B to form a group by the computer. Player A and Player B in a group interact with each other during the session and their payoffs are determined by the decisions made by both sides. The study will be conducted in an anonymous fashion. The administrators can only identify you by the unique User ID you are assigned with. Participants will not be able to identify each other during and after the study as well. In other words, you will not know who your partner is in this study. Please rest assured that your anonymity as a decision maker is strictly preserved. The Game Structure In this room, all players are assigned the role as ‘Player B’. Both Player A and Player B begin with 100 points as their initial endowment. This game consists of two stages. 176 Stage One In Stage One, Player A will decide how many points out from his/her given endowment he/she wants to pass on to you. Player A can pass point, 10 points, 20 points, 30 points, 40 points, 50 points, 60 points, 70 points, 80 points, 90 points or 100 points to you. The points that Player A decides to pass on to you (Player B) will be TRIPLED in value when they reach you. Player A will keep the remaining points. Stage Two In Stage Two, you have the initial 100 points plus the TRIPLED points from Player A. as Player B, you have to decide: z How many points out of total points in your possession you want to pass back to Player A? These points will be added onto Player A’s earnings. You will keep the remaining points after deducting the points you allocate in decision above as your own earnings. You will make these decisions in a “planned” manner, which means you will make a complete “decision plan” conditional on Player A’s potential decisions, even before you know Player A’s actual decision. Once Player A has made his/her “pass on” decision, your correspondence decision will be found in the plan and that particular decision will be realized. Earnings from the Game Based on the above two stages, your earnings are calculated in this way: Your earnings = + 100 endowment points 177 + Three times the points passed to you from Player A − Points you give back to Player A The conversion rate for earnings is 10 points for Singapore Dollar. You will be paid in cash at the end of the session privately. Please fill in the claim card with your ID and Password and bring it for payment collection. There will be a few control questions to test your understanding of the game before you proceed to the real decision. If you have any questions at this moment, please raise your hand and we will attend to you privately. 178 Instructions for the Donation Game (Player B) Instructions Welcome to this study on decision making! Before we start, please turn off your mobile phone and follow this instruction sheet closely while we are reading it out loud. It is crucial for you to understand the game before it starts. General Information In this study, there is a one-round decision making exercise which will last for about one hour. There are two players in the game, Player A and Player B. All Player As are placed in one room, and all Player Bs are placed in another room. Each player A will be randomly matched with a Player B to form a group by the computer. Player A and Player B in a group interact with each other during the session and their payoffs are determined by the decisions made by both sides. The study will be conducted in an anonymous fashion. The administrators can only identify you by the unique User ID you are assigned with. Participants will not be able to identify each other during and after the study as well. In other words, you will not know who your partner is in this study. Please rest assured that your anonymity as a decision maker is strictly preserved. The Game Structure In this room, all players are assigned the role as ‘Player B’. Both Player A and Player B begin with 100 points as their initial endowment. This game consists of two stages. 179 Stage One In Stage One, Player A will decide how many points out from his/her given endowment he/she wants to pass on to you. Player A can pass point, 10 points, 20 points, 30 points, 40 points, 50 points, 60 points, 70 points, 80 points, 90 points or 100 points to you. The points that Player A decides to pass on to you (Player B) will be TRIPLED in value when they reach you. Player A will keep the remaining points. Stage Two In Stage Two, you have the initial 100 points plus the TRIPLED points from Player A. as Player B, you have to decide: z How many points out of total points in your possession you want to donate to a charity. We will give brief information about this chosen charity to you shortly. You will keep the remaining points after deducting the points you donate in decision above as your own earnings. You will make these decisions in a “planned” manner, which means you will make a complete “decision plan” conditional on Player A’s potential decisions, even before you know Player A’s actual decision. Once Player A has made his/her “pass on” decision, your correspondence decision will be found in the plan and that particular decision will be realized. Note that, Player A does not know that you have an option to donate to a charity. The Charity The charity chosen as the beneficiary of this study should you want to donate is a well-known international charitable organization named “Doctors without 180 Borders”. “Doctors without Borders” is a secular humanitarian-aid non-governmental organization best known for its projects in war-torn regions and developing countries facing endemic diseases. We will show you a short video clip about this charity. Be assured that you are doing a real donation! At the end of the session, we will tally the total amount of each individual donation you have made and donate this total amount online through internet. You will witness the whole process of donation, and know that it is you who make the contributions. We will show you the confirmation from “Doctors without Borders” on the screen. Earnings from the Game Based on the above two stages, your earnings are calculated in this way: Your earnings = + 100 endowment points + Three times the points passed to you from Player A − Points you donate to the charity The conversion rate for earnings is 10 points for Singapore Dollar. You will be paid in cash at the end of the session privately. Please fill in the claim card with your ID and Password and bring it for payment collection. There will be a few control questions to test your understanding of the game before you proceed to the real decision. 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Games and Economic Behavior 77(1): 321-344. 188 [...]... no-suggested-donation condition The provision of suggested donations also changed their overall distribution Donations tended not to deviate too widely from the suggested donation amounts This positive impact of suggested donations in Shang and Croson's study can be attributed to the impact of social comparison and the desire to conform to the perceived social norm inferred from the past decisions of other donors... contributions on the likelihood of efficient public-goods provision In one treatment, they varied the subjects' valuation of the public goods, and in the other treatment they kept it uniform across subjects They found that having suggested contributions increases overall contributions and hence also increases the probability of efficient public-goods provision in the heterogeneous valuation treatment,... disasters A brief video clip describing 17 the organization and their work was shown to subjects at the beginning of the experiment After all subjects made their donation decision, we tallied the total amount of money raised in the session and donated it to the charity through its online donation portal The whole donation process was transparent and projected on the screen for all participants to witness... statistics of donations The final row of Table 1.2 depicts the aggregate patterns of donations On average, subjects donated 49.75 percent (99.52 points) of their initial endowment Only 3 percent of subjects decided not to donate to the charity at all, and 12 percent of subjects decided to donate all their endowment to the charity Approximately 58 percent of subjects donated more than 50 percent of their... confounded by the presence of the category effect 7 Our study disentangled the impact of the two effects on donors' contributions On the publicity effect, we evaluated how donations vary with the magnitude of prestige obtained by donors Note that the magnitude of prestige obtained would depend on how the publicity is carried out For this, we compared donations generated under the NR plan, wherein donors receive... to the studies on the effectiveness of suggested donations These prior studies, however, offer inconclusive results Brockner et al (1984) and Fraser et al (1988) showed that, relative to not providing any suggestion, suggesting a small amount of donation would increase the contribution rate However, it has no effect on the absolute amount of total donations solicited 5 In their field experiments of. .. personal income More than 73 percent of these donations came from individual donors (Giving USA Foundation, 2011) Giving away hard-earned money to charities is incompatible with the basic assumption of traditional economic theory, which states that a person's utility, obtained from choosing a particular action, depends only on his or her own monetary payoffs, and not on other people's monetary payoffs... magnitudes of the increase in contributions differ between these two studies In the former there is a 98.26 percent increase in contributions, while in the latter the increase is only 58.75 percent This differing impact of public disclosure on contributions suggests that the strength of the publicity effect emanating from the public disclosure of subjects' identities and/or contributions is sensitive to the. .. ranked by the size of donations Those who donate a sum lower than the lowest threshold amount specified for the lowest category would not have their donations publicly reported In contrast, those who donate an amount that falls within one of the pre-specified categories would have their donations publicly reported and, and placed in a donor honor roll There are many examples of the practical use of category... remaining equal, there might be a point where the positive impact of the category on donations would no longer exist It is worth mentioning that the existence of the category effect is independent of the presence of public disclosure That is, even when donations are not publicly reported, the category effect will still be present as long as the donation category is utilized Our study on the category effect . FOUR ESSAYS ON THE ECONOMICS OF PRO-SOCIAL BEHAVIORS LI JINGPING NATIONAL UNIVERSITY OF SINGAPORE 2013 FOUR ESSAYS ON THE ECONOMICS OF PRO-SOCIAL BEHAVIORS. 182 v Summary This dissertation is composed of four experimental studies on the economics of pro-social behaviors. The first two essays focus on a donation-soliciting strategy known as. studies, the control treatment is the one with full anonymity of subjects. Interestingly, the magnitudes of the increase in contributions differ between these two studies. In the former there