Working Paper: CEPR ID: DP11017
Authors: Michele Belot; Marcel Fafchamps
Abstract: We construct an experiment to study the role of other-regarding preferences in the process of partnership formation. The literature on decentralized matching describes the process of match formation as a market-like process while the literature on other-regarding preferences suggests that such preferences are particularly strong in small partnerships. So we ask: do people apply market-like heuristics when searching for a partner (i.e. behave selfishly); or do they behave more pro-socially, as they do once these partnerships or small entities are formed? And if they do behave differently, what motivates differences in behavior? We focus on one possible mechanism explaining differences in behavior: the saliency of the implications of choices on others. We compare partnership choices in three treatments, varying the saliency of the implications of choices on others. We find that a market-like situation reduces the `good samaritan' spirit in this environment as well: when choosing a partner agents are less likely to sacrifice their own material well-being to increase the well-being of others.
Keywords: Efficiency; Inequality; Markets; Other-Regarding Preferences; Partnership Formation
JEL Codes: A13; C91; D61; D63; D64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| framing of decisions (D79) | other-regarding preferences (D64) |
| group size (C92) | other-regarding preferences (D64) |
| market-like situation (D41) | good Samaritan spirit (D64) |
| group size (C92) | likelihood of sacrificing individual payoffs (C79) |
| high payoff agents (L85) | altruism (D64) |
| low payoff agents (L85) | reluctance to reduce others' payoffs (C79) |
| anonymity in choices (D79) | efficiency in choices (D61) |