Inequity-aversion and relative kindness intention jointly determine the expenditure of effort in project teams.

The literature on team cooperation has neglected the effects of relative kindness intention on cooperation, which we measure by comparing the kindness intentions of an agent to her group members to the kindness shown by other members to this same agent. We argue that the agent's emotional reaction to material payoff inequity is not constant, but rather affected by her relative kindness intention. Then, we apply the model to team projects with multiple partners and investigate how inequity-aversion and relative kindness intention jointly influence team cooperation. We first consider the case of homogeneous agents, where their marginal productivity levels and technical capacities are the same, and then consider the case of heterogeneous agents, where their marginal productivity levels and technical capacities are not the same. Our results show that inequity-aversion has no effect on effort expenditure in the former case, but does affect it in the latter case. The consideration of relative kindness intention may impact the agents' optimal cooperative effort expenditure when their technical capacities are different. In addition, it is beneficial for team cooperation, and might not only reduce the negative impact but also enhance the positive impact of inequity-aversion on the agents' effort expenditures.

Is Tit-for-Tat the Answer? On the Conclusions Drawn from Axelrod's Tournaments.

Axelrod's celebrated Prisoner's Dilemma computer tournaments, published in the early 1980s, were designed to find effective ways of acting in everyday interactions with the strategic properties of the iterated Prisoner's Dilemma game. The winner of both tournaments was tit-for-tat, a program that cooperates on the first round and then, on every subsequent round, copies the co-player's choice from the previous round. This has been interpreted as evidence that tit-for-tat is an effective general-purpose strategy. By re-analyzing data from the first tournament and some more recent data, we provide new results suggesting that the efficacy of tit-for-tat is contingent on the design of the tournament, the criterion used to determine success, and the particular values chosen for the Prisoner's Dilemma payoff matrix. We argue that this places in doubt the generality of the results and the policy implications drawn from them.

Strategic behavior in monkeys.

In a recent paper, Lee et al. examined adaptive decision-making processes by training monkeys to play a competitive game against a computer programmed to play using various strategies. They found that the monkeys' responses were sensitive to the computer's strategies and consistent with reinforcement learning. Research such as this strongly complements current research in behavioral economics. We propose some potential future directions for this work, and put forward conjectures about what might be learned about decision-making in humans.

Effects of financial incentives on the breakdown of mutual trust.

Disagreements between psychologists and economists about the need for and size of financial incentives continue to be hotly discussed. We examine the effects of financial incentives in a class of interactive decision-making situations, called centipede games, in which mutual trust is essential for cooperation. Invoking backward induction, the Nash equilibrium solution for these games is counterintuitive. Our previous research showed that when the number of players in the centipede game is increased from two to three, the game is iterated in time, the players are rematched, and the stakes are unusually high, behavior approaches equilibrium play. Results from the present study show that reducing the size of the stakes elicits dramatically different patterns of behavior. We argue that when mutual trust is involved, the magnitude of financial incentives can induce a considerable difference.

Bonus and Penalty in Common Pool Resource Dilemmas under Uncertainty.

Common pool resource (CPR) dilemmas constitute a class of social dilemmas in which equilibrium behavior results in Pareto deficient outcomes that are not at all desirable by the group. We focus on a class of CPR dilemmas that, in addition to strategic uncertainty about the harvesting behavior of the other group members, include environmental uncertainty about the size of the CPR. In an attempt to decrease the rate of requests from the common pool, and thereby increase individual payoffs, we extend previous research-both theoretically and experimentally-in two different directions. In the bonus treatment, a reward is given to the agent(s) who requests the least, and in the penalty treatment, a charge is imposed on the agent(s) who requests the most. We show that under equilibrium play the bonus treatment decreases total group request, whereas the penalty treatment increases it. Our experimental results do not support this prediction. Rather, both treatments considerably decrease the rate of request and, therefore, increase the rate of provision. The penalty treatment is shown to be more effective in reducing individual requests and enhancing provision rates than the bonus treatment. Copyright 2001 Academic Press.