Risk and inequality aversion in social dilemmas

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14 January 2014

We experimentally investigate cooperative behaviour in a social dilemma situation, where the socially effcient outcome may be encouraged by risk aversion and/or inequality aversion. The first part of our experiment is devoted to the elicitation of subjects’ aversion profile, taking care not to confuse the two dimensions. Subjects are then grouped by three according to their aversion profiles, and they interact in a repeated social dilemma game. In this game, agents are characterised by a social status so that the higher the agent’s status, the higher her earnings. Cooperation is costly for a majority of agents at each period, but statuses can be reversed in future periods. We show that cooperation is strongly influenced by the group’s aversion profile. Groups averse in both dimensions cooperate more than groups averse in only one dimension. Moreover cooperation seems to be more affected by risk aversion, whereas one might interpret cooperative behaviour as an inequality averse or altruistic attitude.