Behavioral Foundations of Reciprocity: Experimental Economics and Evolutionary Psychology

Abstract

"Laboratory experiments have generally supported the fundamental theorem that, in classical property rights environments, noncooperative behavior in large group markets yields efficient social outcomes. Experiments, however, regularly fail to support the game theoretic prediction of noncooperative behavior in small group strategic interaction and in public good environments. In these two types of experiments subjects frequently achieve more efficient social outcomes they collect more money from the experimenter than noncooperative game theory predicts. As we interpret it, subject behavior in these experiments exhibits a habit of reciprocity even in single-play games. Evolutionary psychologists hypothesize that this is because humans have evolved mental algorithms for identifying and punishing cheaters who behave non-cooperatively in social exchange. For about 2-3 million years humans have lived in small interactive groups, and this, has required adaptation to the fitness demands of social exchange. The hypothesis follows that the human mind is composed of context-specific mental modules that operate on the cost-benefit characteristics of social exchange. This requires the mind to be adept at detecting cheating on implied or explicit social exchange contracts. This hypothesis is contrary to game and economic theories which formally develop a small number of domain general principles of strategic interaction, which are applicable across all strategically similar contexts. Evolutionary psychologists have reported an impressive number of individual decision making experiments designed to test competing hypotheses about human cognition rules in social exchange. We build on this work, and extend it as an organizing principle to examine and explain subject behavior in public good, ultimatum, dictator, and more general extensive form bargaining games."