Social Preferences and Cognitive Reflection: Evidence from Dictator Game Experiment

ORIGINAL RESEARCH published: 19 June 2015 doi: 10.3389/fnbeh.2015.00146 Social preferences and cognitive reflection: evidence from a dictator game experiment Giovanni Ponti 1, 2* and Ismael Rodriguez-Lara 2, 3 1 Laboratory of Theoretical and Experimental Economics (LaTEx), Departamento de Fundamentos del Análisis Económico, Universidad de Alicante, Alicante, Spain, 2 Dipartimento di Economia e Finanza, LUISS Guido Carli, Roma, Italy, 3 Department of Economics, Middlesex University London, London, UK Edited by: Rosemarie Nagel, Universitat Pompeu Fabra, ICREA, Spain Reviewed by: John Smith, Rutgers University-Camden, USA Francesca Pancotto, University of Modena and Reggio Emilia, Italy *Correspondence: Giovanni Ponti, Dipartimento di Economia e Finanza, LUISS Guido Carli, Viale Romania, 32, 00185 Roma, Italy Received: 29 September 2014 Accepted: 18 May 2015 Published: 19 June 2015 Citation: Ponti G and Rodriguez-Lara I (2015) Social preferences and cognitive reflection: evidence from a dictator game experiment. Front. Behav. Neurosci. 9:146. doi: 10.3389/fnbeh.2015.00146 This paper provides experimental evidence on the relationship between social preferences and cognitive abilities, which we measure using the Cognitive Reflection Test (CRT). We elicit social preferences by way of 24 dictatorial situations, in which the Dictator’s choice sets include (i) standard Dictator games, where increasing the Dictator’s payoff yields a loss for the Recipient, (ii) efficient Dictator games, where increasing the Dictator’s payoff also increases that the Recipient’s; as well as other situations in which (iii) either the Dictator’s or (iv) the Recipient’s monetary payoff is held constant. We partition our subject pool into three groups: reflective (scoring 2 or more in the CRT), impulsive (opting twice or more for the “intuitive” but wrong answers in the CRT) and the remainder. We find that impulsive Dictators show a marked inequity aversion attitude, especially in standard Dictator Games. By contrast, reflective Dictators show lower distributional concerns, except for the situations in which the Dictators’ payoff is held constant. In this case, reflective Dictators give significantly more. Keywords: cognitive reflection, social preferences, experimental economics, behavioral economics, dictator games JEL Classification: C7, C91, D30, D63 Introduction Researchers have made substantial improvements in understanding the relationship between various measures of cognitive ability and economic behavior in different domains. In this respect, measures of cognitive ability have been shown to determine the degree of strategic sophistication (e.g., Rydval et al., 2009; Brañas-Garza et al., 2012; Carpenter et al., 2013) and appear to correlate with risk and time preferences (Frederick, 2005; Brañas-Garza et al., 2008; Burks et al., 2009; Dohmen et al., 2010; Andersson et al., 2013; Benjamin et al., 2013), as well as with heuristics and well-known behavioral biases in financial decisions, such as overconfidence, anchoring or the socalled conjunction fallacy (Oechssler et al., 2009; Bergman et al., 2010; Hoppe and Kusterer, 2011; Toplak et al., 2011). Despite that there have been noteworthy advances in the literature on pro-social behavior over the last years, the relation between social preferences and cognitive abilities is still sparse and far from univocal. Chen et al. (2013) find that subjects who perform better in the Math portion of the SAT (formerly referred as the Scholastic Aptitude Test) are more generous in both the Dictator Game and in a series of small-stakes “dictatorial” (i.e., unilateral) decisions, known as Social Value Orientation (SVO), albeit subjects with higher Grade Point Average (GPA) outcomes tend Frontiers in Behavioral Neuroscience | www.frontiersin.org 1 June 2015 | Volume 9 | Article 146 Ponti and Rodriguez-Lara Social preferences and cognitive reflection to be more selfish in dictator decisions. This latter result is in line with those of Ben-Ner et al. (2004) or Brandstätter and Güth (2002), who find a negative relationship between giving in a Dictator Game and performance on cognitive tests. By contrast, Benjamin et al. (2013) find that school test scores do not affect the Dictator’s giving and, somewhat related, Hauge et al. (2009) argue that the effect of cognitive load on giving “is small if at all existing. . . ” (p. 15)1 . Prompted by the paucity of clear-cut evidence in the field, this paper aims at shedding light on the relation between prosocial attitudes and cognitive abilities. To this aim, we borrow the design and the experimental evidence of Di Cagno et al. (2013), who set up a complex experimental design to estimate subjects’ social preferences over utilities, where the latter include others’ risk and distributional concerns. In their protocol, social preferences are elicited by submitting 98 subjects to a sequence of 24 dictatorial “situations,” which differ upon the distributional characteristics of the Dictator’s choice sets. In Standard Dictator situations, reducing the Dictator’s monetary payoff yields an increase of that to the Recipient, as it is usually the case in the Dictator Game (e.g., Forsythe et al., 1994; Andreoni and Miller, 2002). Efficient Dictator situations are such that the Dictators’ and Recipients’ monetary payoffs move in the same direction. Thus, whenever the Dictator increases or decreases her own payoff, the Recipient’s payoff increases or decreases, as well. Di Cagno et al. (2013) complete the puzzle by considering situations in which either the Dictator’s or the Recipient’s payoff is held constant over the entire Dictator’s choice set, so that Only Recipients or Only Dictators are affected by the Dictators’ decision. This novel design allows us to explore a wider spectrum of distributional concerns than what has been usually studied in standard Dictator games. Cognitive abilities are elicited in our experiment by way of the Cognitive Reflection Test (CRT, Frederick, 2005). The CRT is a 3-item task designed to measure the tendency to override an intuitive and spontaneous response alternative that is incorrect and to engage in further reflection that leads to the correct response. Following Cueva et al. (2015), we partition our Dictator pool into 3 subgroups (“types”): those characterized by high cognitive reflection (reflective subjects: 2 right answers or more in the CRT, about 40% of our subject pool), high cognitive impulsiveness (impulsive subjects: 2 intuitive, spontaneous incorrect answers or more in the CRT, about 50% of our subject pool) and the remainder (others: about 10%). Our evidence shows that reflective Dictators are more selfish whenever they can increase their own payoffs, even at the cost of the Recipients’ (i.e., Standard Dictator and Dictators Only situations). By contrast, reflective Dictators are more altruistic in situations where their payoffs are not affected in terms of giving (i.e., (...truncated)