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Are individuals more generous in loss contexts?

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Abstract

This paper reports the results of dictator experiments in which the context is varied between a loss and gain frame. In some treatments, individuals have the possibility to sort and self-select the frame they prefer. We demonstrate that higher shares are transferred to the recipient in the loss frame compared to the gain frame when the situation occurs naturally, while the opposite result holds when the participants provoke themselves the situation. Our main result can be attributed primarily to a gender effect, i.e. female participants acting more generously in loss frames.

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Notes

  1. Experimental investigations of bankruptcy problems have addressed a part of this point. In this type of experiment, authors sought to determine how the liquidation value should be divided among creditors when a firm goes bankrupt (Herrero et al. 2010; Cappelen et al. 2019). However, in this type of experiment, the sharing of the liquidation value is decided by a participant who is not affected by the bankruptcy. Antinyan (2014) investigates this issue in the dictator game by looking at how participants split a reduced endowment (a gain) after incurring a loss (a reduction of the pie).

  2. We also extend our investigation to non-conventional samples (see Online Appendix 3).

  3. We recently found a PhD thesis (Hillenbrand 2016) including a game where an individual must decide how to share a loss between him and another person. He finds that offers are lower in the loss than in the gain context. However, in addition to all the other differences with our design (e.g. binary choice, repeated game, etc.), the game presented is not strictly speaking a standard dictator game because the receiver does not have a passive role. Indeed, he is the dictator of another person. Thus, in this experiment, the participant has to decide how to share a loss with another dictator, which will then do the same with another dictator, etc. Thus, “moral responsibility” towards a powerless individual cannot be the motivation for giving. All individuals in this experiment have the same power, which could explain in large part the differences with our results. For more details, see Hillenbrand (2016), pp. 41–62.

  4. Indeed, splitting a reduced endowment after incurring a loss and directly splitting a loss which is deducted from an initial endowment are different framings that are not likely to be equivalent from the behavioral perspective: the first situation, presented in Antinyan (2014)’s design, is simply a traditional dictator sharing situation in which the dictator has to share a reduced pie (i.e., a lower gain), while having as a reference point a bigger pie; the second situation (our design) is a situation in which both participants have an identical initial reference point corresponding to a received endowment that will be affected by the loss and the decision of the dictator. The first situation is therefore still a gain framed situation, while the second, a loss framed situation.

  5. According to List (2007, pp. 484–485), “in the dictator game, the traditional action set invokes expectations of the givers and receivers that seemingly “demand” a positive gift, since a zero transfer is equivalent to being entirely selfish with money that an authoritative figure has just kindly endowed. In lieu of the fact that this same authoritative figure asks the subject if she would like to share the endowment, the wheels of motion for giving are set in place. (…) By allowing choices that are not entirely selfish in the nonpositive domain, the social norms of the game change, providing the dictator with the “moral authority” to give nothing. In this spirit, subjects are using the contextual cues of the game to figure out which set of norms given in dictator games applies to the particular problem at hand”.

  6. Empathy-like motivations have long been studied in social psychology. See for example Willer et al. (2015).

  7. The binary prediction is due to the linearity of the model. This is a satisfactory approximation of decisions in the dictator game (see e.g. Engel 2011).

  8. Our results show that only 2.8% of dictators gave more than half of their endowment in our main experiment.

  9. We chose to keep the model in its linear version as the Fehr and Schmidt (1999) model. Using the nonlinear models would allow us to refine the predictions but would not affect them in essence.

  10. The utility function is therefore assumed to be additively separable in the value function and the inequality aversion term. Such a form of the utility function has been provided axiomatic characterization by Neilson (2006).

  11. These results should nevertheless be taken with precaution as Croson and Gneezy (2009) highlight the fact that women’s behavior is more sensitive to subtle variations in the context of the experiment than the behavior of men.

  12. A robustness test of the lab experiment was conducted by running the same experiment with a sample of 232 more diverse participants, see Online Appendix 3.

  13. As students reported no variability in age, we did not use this variable in the regressions.

  14. All tests are two-sided.

  15. See Figure A.3 in Online Appendix 4, the share of male dictators leaving only 20% or less of the allocation to the recipient is 60% in the gain-framed DG, whereas it is 46% in the loss context.

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Acknowledgements

This work was supported by the Burgundy School of Business. We are very grateful for insightful comments and helpful suggestions from the editors, as well as the two anonymous reviewers, throughout the revision process. We would also like to thank several colleagues for helpful comments.

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Correspondence to François Cochard.

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Cochard, F., Flage, A., Grolleau, G. et al. Are individuals more generous in loss contexts?. Soc Choice Welf 55, 845–866 (2020). https://doi.org/10.1007/s00355-020-01266-y

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