Catherine C. Eckel
Texas A&M University
George Mason University - Department of Economics; George Mason University - Interdisciplinary Center for Economic Science (ICES)
American Economic Review, Vol. 101, 2011
There is growing evidence of systematic heterogeneity in behavior by observable characteristics, such as what one would see in a face. We ask, is there informational value in knowing these characteristics in a strategic interaction? Subjects are given the opportunity to purchase a photograph of their partner in the play of a trust game. Not everyone purchases the photo, even at prices as low as $0.20. Senders (first movers in the game) have a more inelastic demand for pictures than responders (second movers). White senders have a substantially higher demand than nonwhite senders or responders. For responders, there is no difference in demand for pictures across ethnicity or sex. White senders who pay to see the picture of their partner use the information to discriminate, sending significantly less to black responders than to white responders. Overall, responders return a higher percentage of the amount received as offers go up, but they do differentiate that percentage when they see the picture of the sender, returning more to a member of the same ethnicity. A face, it appears, has strategic value, especially for those who will use the information to differentiate their decisions.
Number of Pages in PDF File: 16Accepted Paper Series
Date posted: July 13, 2011 ; Last revised: July 21, 2011
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