Becoming Friends or Foes? How Competitive Environments Shape Social Preferences

28 Pages Posted: 13 Feb 2019 Last revised: 23 Dec 2019

See all articles by Eugen Dimant

Eugen Dimant

University of Pennsylvania, Behavioral Ethics Lab

Kyle B. Hyndman

University of Texas at Dallas

Date Written: December 20, 2019

Abstract

We study the interaction between competition and social proximity on altruism, trust, and reciprocity. We decompose the behavioral channels by utilizing variants of both the Trust Game and the Dictator Game in a design that systematically controls the transmission of relevant information. Our results suggest that competitive environments, and in particular the outcomes thereof when competitors are socially proximate, affect social preferences. Within the context of the Trust Game, we find that winning makes individuals more trusting, less reciprocal, and less altruistic. In order to decompose the underlying mechanism of decision-makers, we subsequently use the Dictator Game and find that knowledge about winning the competition decreases giving, especially with increased proximity between competitors. From this we can conclude that the observed increase in trust is guided by self-serving concerns to maximize the total pie rather than altruistic concerns to compensate the competitor who lost the competition. Our results provide helpful insights into the structure of incentives within institutions and companies, which is known to affect performance.

Keywords: Altruism, Competition, Reciprocity, Social Proximity, Trust

JEL Classification: C9, D01, D6, D9

Suggested Citation

Dimant, Eugen and Hyndman, Kyle B., Becoming Friends or Foes? How Competitive Environments Shape Social Preferences (December 20, 2019). Available at SSRN: https://ssrn.com/abstract=3326107 or http://dx.doi.org/10.2139/ssrn.3326107

Eugen Dimant (Contact Author)

University of Pennsylvania, Behavioral Ethics Lab ( email )

Philadelphia, PA 19104
United States

HOME PAGE: http://https://sites.google.com/site/eugendimant/

Kyle B. Hyndman

University of Texas at Dallas ( email )

2601 North Floyd Road
P.O. Box 830688
Richardson, TX 75083
United States

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