Individual Behavior and Group Membership
University of California, Santa Barbara - Department of Economics
University of Pittsburgh - Department of Economics; Duke University - Fuqua School of Business; Duke University - Department of Economics
University of Minnesota - Twin Cities - Department of Economics
December 21, 2006
People who are members of a group and identify with it behave differently from people who perceive themselves as isolated individuals. This difference depends on two main factors. First, preferences over outcomes change with the degree of identification with the group. Second, this identification depends on the saliency of the group structure. This paper tests these hypotheses and shows that group membership affects preferences over outcomes, and saliency of the group affects the perception of the environment.
In two strategic environments, Battle of the Sexes and Prisoner's Dilemma, we create groups by allocating subjects to be Row or Column players. We manipulate the saliency of group membership by letting a player's own group watch as a passive audience as decisions are made, and by making part of the payoff common for members of the group.
There is a strong and significant effect of group membership: It increases the aggressive stance of the hosts (people who have their group members in the audience), and reduces the one of the guests. The effect on outcomes depends on the game: In the Battle of the Sexes, the aggressiveness of hosts leads to more coordination; in the Prisoner's Dilemma, it leads to less cooperation. In the first case efficiency is increased, while in the second it is diminished.
We also test for differences between in-group and out-group behavior in Prisoner's Dilemma games. In contrast to the minimal-group paradigm of the social-psychology literature, minimal groups do not affect behavior in our strategic environment. We see strong differences between in-group and out-group behavior only when we increase the saliency of group membership by having a degree of common payoffs.
Number of Pages in PDF File: 40
Keywords: Group membership, identity, salience, behavioral game theory, social effects
JEL Classification: A13, A14, C70, C91, C92
Date posted: April 5, 2006