Rationality and Society recent issues

Externalities in Exchange Networks: An Adaptation of Existing Theories of Exchange Networks

Dijkstra, J. — Fri, 16 Oct 2009 07:21:19 PDT

The present paper extends the focus of network exchange research to externalities in exchange networks. Externalities of exchange are defined as direct effects on an actor’s utility, of an exchange in which this actor is not involved. Existing theories in the field of network exchange do not inform us on how externalities are predicted to affect behavior in exchange networks. Three prominent theories in the field, core theory, power dependence theory and exchange resistance theory, are extended to exchange networks with externalities, allowing three main conclusions about the expected effects of externalities in exchange networks: externalities (i) change actors’ payoffs, (ii) change the exchange pattern, and (iii) change the power distribution across actors. The investigated theories yield predictions concerning the occurrence and magnitude of these effects. A method is proposed to separate the effect of (i) the network, (ii) the externalities, and (iii) the interaction between network and externalities.

Club Goods and Post-Disaster Community Return

Chamlee-Wright, E., Storr, V. H. — Fri, 16 Oct 2009 07:21:19 PDT

Hurricane Katrina caused over one hundred billion dollars in property damage in the Greater New Orleans region. Although much attention has been paid to why particular communities have begun to recover and others have failed to rebound, very little attention has been paid to how the communities that have recovered actually went about doing so. This paper attempts to close that gap by examining how the church provision of club goods can foster social cooperation and community redevelopment in the wake of a disaster. In particular, we investigate the swift return of the community surrounding the Mary Queen of Vietnam (MQVN) Catholic Church in New Orleans East after Hurricane Katrina. Utilizing a unique bundle of club goods provided by the MQVN Catholic Church, residents in the New Orleans East Vietnamese-American community (a) rebuilt their distinct ethnic— religious—language community, (b) overcame the social coordination difficulties created by Katrina, and (c) engaged in successful political action to protect their community.

Stratification Theory, Socioeconomic Background, and Educational Attainment: A Formal Analysis

Lucas, S. R. — Fri, 16 Oct 2009 07:21:19 PDT

Three proposals explicate the social origins/education transitions association. Maximally maintained inequality (MMI) (Raftery and Hout 1993) claims the association declines only at transitions high origin persons universally or nearly universally make. Relative risk aversion (RRA) (Breen and Goldthorpe 1997) suggests broader inequality reduction is possible and depends on changing costs and norms. Effectively maintained inequality (EMI) (Lucas 2001) contends meaningful inequality reduction is elusive because qualitatively different types of education maintain consequential inequality, even at universal transitions. Each proposal has evidentiary support, yet because proposals highlight different association indices, most are described informally, and their distinctiveness is disputed, comparative evaluation requires a prior, clarifying, formal analysis. Formal analysis reveals that MMI is non-falsifiable. RRA and EMI are falsifiable and are potentially but not necessarily complementary. Future research should investigate whether and why RRA, EMI, both, or neither, apply.

Reputation and Reliability in Collective Goods: The Case of the Online Encyclopedia Wikipedia

Anthony, D., Smith, S. W., Williamson, T. — Mon, 20 Jul 2009 04:03:59 PDT

An important organizational innovation enabled by the revolution in information technologies is `open source' production which converts private commodities into essentially public goods. Similar to other public goods, incentives for reputation and group identity appear to motivate contributions to open source projects, overcoming the social dilemma inherent in producing such goods. In this paper we examine how contributor motivations affect the type of contributions made to the open source online encyclopedia Wikipedia. As expected, we find that registered participants, motivated by reputation and commitment to the Wikipedia community, make many contributions with high reliability. Surprisingly, however, we find the highest reliability from the vast numbers of anonymous `Good Samaritans' who contribute only once. Our findings of high reliability in the contributions of both Good Samaritans and committed `zealots' suggest that open source production succeeds by altering the scope of production such that a critical mass of contributors can participate.

Shadow of the Future, Risk Aversion, and Employee Cooperation

Lambooij, M., Flache, A., Siegers, J. — Mon, 20 Jul 2009 04:03:59 PDT

In this paper, we examine whether and how the shadow of the future and risk aversion affect employee cooperation with the employer. We distinguish, formalize and test two conflicting arguments as used in the literature, which we denote the reward argument and the relation argument. Whereas the reward argument predicts that risk aversion affects cooperation in a negative way, the relation argument predicts a positive effect of risk aversion on cooperation. We show that both arguments are consistent with the view that a longer shadow of the future increases cooperation. Hypotheses are tested against survey data obtained from two samples of Dutch employees (N =109 and N = 213, respectively). The results suggest moderate support for the relation argument.

Shall We Be Resolute?

Uzan-Milofsky, M. — Mon, 20 Jul 2009 04:03:59 PDT

Can we change our rational mode of deliberation in order to benefit from cooperation? Two philosophers believe we can. Indeed, David Gauthier and Ned McClennen argue that it is rational to replace the standard form of rationality as described in game theory with a constrained form of rationality. Such a change of rationality is possible because it enables agents to gain from mutual advantage and to avoid the costs of enforcement systems. If these philosophers are right, the consequences of their argument would be groundbreaking in social contract theories. Unfortunately, in this article, I want to argue that the change of rationality they claim possible is not only rationally inferior to the standard form of rationality but is also non-viable as a stand-alone rational concept.

Higher Punishment, Less Control?: Experimental Evidence On the Inspection Game

Rauhut, H. — Mon, 20 Jul 2009 04:03:59 PDT

Rational choice theory predicts for higher punishment less crime. However, many field studies could not support this conclusion. A game theoretic approach can explain these puzzling findings because it takes not only criminals' but also control agents' rationality into account. Mixed Nash equilibria predict for higher punishment less control and no effect on crime rates. A new experimental design is introduced to test game theoretic hypotheses. 196 subjects have been partitioned into `inspectees' who can steal money from each other and `inspectors' who can invest in control activities to catch inspectees. Static and dynamic analyses show that strategic interaction plays an important role for crime and punishment. However, effects are not as strong as predicted. Higher punishment indeed causes less control, but crime is deterred as well. Furthermore, dynamical analyses with the learning model fictitious play reveal that humans learn only slowly in inspection situations.

Power, Trust, and Institutional Constraints: Individual Level Evidence

Oskarsson, S., Svensson, T., Oberg, P. — Tue, 14 Apr 2009 08:30:07 PDT

This article focuses on how institutions matter in generating relationships of trust in an environment of unequal power. Trust is seen as the truster's expectation that the trustee will act trustworthily out of moral commitment and/or interest in continuing the relationship. Using cross-sectional data from a survey conducted in 2006 on Swedish employment relations the authors show that perceived power asymmetries between an employee and his or her superior have a negative impact on trust. However, perceptions about the enforcement and fairness of institutional constraints — rules for dismissal, conflict resolution, wage setting, and promotion — have conditioning effects. When the respondents perceive the rules as fair, trust is less influenced by increasing power asymmetries between an employee and his or her superior. The results have important implications. By designing institutions that are considered fair, distrust may be mitigated even in situations characterized by extensive power asymmetries.

Organic Farming as a Rational Choice: Empirical Investigations in Environmental Decision Making

Best, H. — Tue, 14 Apr 2009 08:30:08 PDT

Based on a postal survey of farmers conducted in 2004 in Western Germany (n = 657), a rational choice model of the adoption of organic farming is tested. Using methods of direct utility measurement, rational choice (RC) theory is applied directly in the empirical study. By that, questionable assumptions on the variability of preferences and the type of preferences to use in RC explanations can be avoided. The results indicate that the subjectively expected utility model is well suited to explain the adoption of organic farming. Expectations on the development of operational characteristics of the farm and farmers' daily work are at the core of the decision. Farmers especially consider aspects like pest and weed control, the development of yields or the use of chemical substances. While solely economic factors like prices and marketing are also important, these are subordinate to operational aspects. In addition, a moderate impact of environmental concern regarding the adoption of organic farming is observed.

The Role of Personal Involvement and Responsibility in Unfair Outcomes: A Classroom Investigation

Branas-Garza, P., Duran, M. A., Paz Espinosa, M. — Tue, 14 Apr 2009 08:30:08 PDT

This paper explores new motivations behind giving. Specifically, it focuses on personal involvement and responsibility to explain why decision makers give positive amounts in dictatorial decisions. The experiment is designed to uncover these motivations. Subjects face the problem of a dictator's allocation of an indivisible amount to one of two players; indivisibility creates an extremely unequal outcome and the dictator is given a chance to correct this outcome at a cost. The willingness to pay to correct the outcome is examined under different scenarios so that we learn about several features concerning preferences.

The Rationale of Rationality

Weesie, J., Snijders, C., Buskens, V. — Tue, 14 Apr 2009 08:30:08 PDT

Our research starts from the assumption that actors use a single decision theory to guide them on how to behave in all possible one-shot two-person encounters. To address which decision theories perform well, we let 17 theories compete in a large number of randomly selected symmetric 2 x 2 games. It turns out that the decision theory that optimizes its own payoff under the assumption that the other actor behaves randomly wins by a small margin. Second, we study the `evolution of rationality.' In a quasi-biological setup where more successful strategies generate more offspring, the decision theory that always plays the behavior that belongs to the risk-dominant Nash equilibrium emerges as the long-term survivor from an initially mixed pool of decision theories. We also confront the decision theories with human experimental data. The decision theory that always aims for the highest possible payoff for itself performs best against humans.

Interpretation and Rational Choice

Elster, J. — Thu, 15 Jan 2009 08:08:52 PST

Rational choice explanation plays a critical role in the interpretation of both texts and social behavior. The interpretation of fiction benefits from the use of this type of explanation. It can inform understanding of both the author's choice and the behavior of the fictional characters the author creates. Examples of this are offered from a number of pre-modern novels and plays. The situation is somewhat more complicated when rational choice explanation is applied to the study of real human behavior. Human beings can misrepresent the reasons for their actions. This misrepresentation can render understanding more difficult. The behavior of participants in civil wars demonstrates well this misrepresentation and the problems it generates for successful theory construction.

Rationality, Intelligibility, and Interpretation

Stone, P. — Thu, 15 Jan 2009 08:08:52 PST

Behavior is rational to the extent that it optimizes actions, beliefs, and information collection subject to various constraints. It is intelligible to the extent that it makes sense to an interpreter. The two concepts are connected because interpretation ordinarily proceeds on the assumption that others would do what we do under the same circumstances, mutatis mutandis. And because we of necessity understand our own behavior as being as rational as possible given the constraints we face, we must interpret the behavior of others in the same way. This paper develops the concepts of rationality and intelligibility, and applies them to the problem of interpretation. It does so by relying upon Jon Elster's recent work upon the same concepts. Like Elster, moreover, this paper concerns both the interpretation of real behavior and that of fictional characters.

The Dynamics of Contracts and Generalized Trustworthiness

Simpson, B., Eriksson, K. — Thu, 15 Jan 2009 08:08:52 PST

Generalized trust, or trust in strangers, has been traced to a wide range of societal benefits. But generalized trust is not sustainable in the absence of widespread generalized trustworthiness, that is, the tendency for strangers to honor trust extended to them. While there has been much work on the origins and consequences of generalized trust, surprisingly little research has addressed the antecedents of generalized trustworthiness. We argue that generalized trustworthiness is negatively affected by prior exposure to a ubiquitous extrinsic motivator of trustworthy behavior, contracts. Specifically, drawing on classic social psychological research on the overjustification effect, we argue that actors previously constrained by contracts will attribute their own `trustworthy' behavior in those interactions to the contract itself. According to overjustification arguments, this misattribution should lead to a decrease in intrinsic motivations to act trust-worthily in interactions where the actor is not constrained by the contract. Results of a new experiment support this argument.

Political Corruption and Social Trust: An Experimental Approach

Rothstein, B., Eek, D. — Thu, 15 Jan 2009 08:08:52 PST

The main question addressed in this paper is how the great variation in the level of social trust in different countries can be explained. Most empirical research on this question has been based on survey data which has limitations when it comes to capturing the causal mechanisms. Building on theories that point to the importance of trustworthy governmental institutions for creating social trust, two parallel experiments were conducted in two countries where the levels of corruption and social trust are very different. One group of 64 Swedish and one group of 82 Romanian undergraduate students responded to a number of scenarios which describe situations at a police station or a doctor's surgery in a foreign country. In the scenarios, the person tries to receive immediate assistance from the police/doctor at the same time as another person who lives in the `unknown' country. These encounters varied within groups in terms of (1) whether or not a bribe was used in order to receive immediate assistance, (2) whether the other person or the official took the initiative to request/offer immediate assistance in exchange for the bribe, and (3) outcome in terms of whether immediate assistance was approved or declined as a result of the offer or demand for a bribe. Type of authority (police vs. doctor) was a between-groups factor. Subsequent to each scenario, participants' levels of various aspects of vertical and horizontal trust were measured. As hypothesized, the Romanian sample had reliably lower initial levels of horizontal trust than the Swedish sample. For both samples, however, the results showed the expected effects of bribe, initiator, and outcome on all dependent trust measures. The results supported the hypothesis that trust in authorities influences the perceptions of the trustworthiness of others in general. Even though some of the effects were stronger for one sample than for the other, the influence of vertical trust on social trust was true for both the high- and the low-trusting sample.

A New Model of Wage Determination and Wage Inequality

Jasso, G. — Thu, 15 Jan 2009 08:08:52 PST

This paper proposes a new model of wage determination and wage inequality. In this model, wage-setters set workers' wages; they do so either directly, as when individuals vote in a salary committee, or indirectly, as when political parties, via the myriad of social, economic, fiscal, and other policies, generate wages. The recommendations made by wage-setters (or arising from their policies) form a distribution, and all the wage-setter-specific distributions are combined into a single final wage distribution. There may be any number of wage-setters; some wage-setters count more than others; and the wage-setters may differ among themselves on both the wage distribution and the amounts recommended for particular workers. We use probability theory to derive initial results, including both distribution-independent and distribution-specific results. Fortuitously, elements of the model correspond to basic democratic principles. Thus, the model yields implications for the effects of democracy on wage inequality. These include: (1) the effects of the number of wage-setters and their power depend on the configuration of agreements and disagreements; (2) independence of mind reduces wage inequality, and dissent does so even more; (3) when leaders of democratic nations seek to forge an economic consensus, they are unwittingly inducing greater economic inequality; (4) arguments for independent thinking will be more vigorous in small societies than in large societies; (5) given a fixed distributional form for wages and two political parties which either ignore or oppose each other's distributional ideas, the closer the party split to 50–50, the lower the wage inequality; and (6) under certain conditions the wage distribution within wage-setting context will be normal, but the normality will be obscured, as cross-context mixtures will display a wide variety of shapes.