Framing and Communication in Experiments

Framing and communication in experiments:

Is the effect of social framing in the prisoner’s dilemma different when you add communication?

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Master thesis

Erasmus school of ecnomics

economics and business

Behavioral economics

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Abstract

The focus of this thesis is to answer the question whether communication changes the effect of social framing in the Prisoner’s Dilemma. An online survey is conducted to answer this question. The following four treatments are in the different surveys: Wall Street game frame and Community game frame, both frames have one treatment with and one without communication. In total 146 respondents participated in the survey. The main result of this thesis is that there is no significant difference in the cooperation rate between the different treatments in this online survey. This means that that communication does not change the effect of social framing in this scenario. An interesting finding is that in the scenario of the Wall Street game frame with communication people are more likely to change strategy compared to the no communication treatment.

Table of contents

1. Introduction2
2. Literature review 5
3. Methodology 16
4. Results 22
5. Conclusion 32
6. Discussion 34
7. References 36
8. Appendix40

1. Introduction

A popular area of research in (behavioral) economics is in the field of decision making in social dilemmas. A reason for this is that people face social dilemmas often in their personal and professional life. Van Lange, Joireman, Parks and van Dijk (2013) define a social dilemmas as “situations in which a non-cooperative course of action is (at times) tempting for each individual in that it yields superior (often short-term) outcomes for self, and if all pursue this non-cooperative course of action, all are (often in the longer-term) worse off than if all had cooperated”. This definition is broad which means that social dilemmas are everywhere; an example of a social dilemma is a fundraising of a local charity organization, this situation leads to a public goods dilemma. The reason for this is that not contributing leads to the highest personal payoff, because when you are not contributing to the good you are likely to still be able the make use of it when it is realized. However, if nobody contributes nothing will be realized which has a negative effect on the community. Therefore, if everyone contributes the local charity organization can be active which has a positive effect on the local community as a whole. This means that the community is better of when everyone is donating. However, everybody has the same personal incentive to not contribute and free ride on the contributions of the others. This is a social dilemma, because in the short term you may be better off by not contributing, however in the long term the community will be better off if they had cooperated. Social dilemmas come in many different forms, examples of social dilemmas are the dictator game, the public good game and the Prisoner’s Dilemma. There are general theories about individual decision making that are not focused on social dilemmas. Weber, Kompelman and Messick (2004) discuss the appropriateness framework as a theory that explains how people make decision in the case of a social dilemma. This because theories like expected utility and prospect theory are not feasible for the explanation of the decision making process in a social dilemma due to the fact that these theories are designed for individual decision-making and a social dilemma involves more than one person.

Many factors can affect the willingness to cooperate of people that are in the situation of a social dilemma. Van Lange, Joireman, Parks and van Dijk (2013) wrote a review about the psychology of social dilemmas. In this review, an overview is given of the literature on cooperation in social dilemmas. According to this article, the factors showed in Table 1 can have effect on the cooperation rate in the case of a social dilemma. These factors are divided into three different categories. The first category consist of factors that have a structural effect. These structural effects refer to the effects that the features of the decision and/or social situation have on the decision. This is mostly covering the basic setup of the decision for example the structure of the rewards. The second category, the psychological impact, refers to the effect of internal motives, framing, recently primed schemas or affect of the dilemma. The focus hereby is on how the dilemma affects the internal motives people have when making this decision. An example of this impact is the frame of the dilemma. The last category, the dynamic effect, refers to the effect on how certain individuals respond to a tit-for-tat strategy, whether forgiveness or retaliation will predominate when others do not cooperate. In this category, communication is the most well-known effect.

Table 1: The factors that have an effect on the cooperation rate in social dilemmas according to van Lange, Joireman, Parks and van Dijk (2013)

As Table 1 shows there is a list of factors that can have an effect on the cooperation in social dilemmas. However, it is not possible to test for the effects of all factors at the same time. Therefore this thesis will focus on the effect of framing and communication in a social dilemma, the Prisoner’s Dilemma. Categorizing these effects as they are in Table 1, the effect of framing is in the psychological impact category and communication is in the dynamic effect category. The decision to research on these two factors is made because there is much literature about the effect of communication and the effect of framing, however there is not much research about whether these effects are interacting with each other. To investigate these phenomena the Prisoner’s Dilemma is used as the social dilemma. This is chosen because it is a well-known and researched dilemma. The results of these researches make it clear what the effect is of both the factors. Combing these results there can be an implication about what a possible interaction effect could be. An example of research in the area of framing effects is the paper of Liberman et al. (2004). In this paper the difference in cooperation rate when the name of the game is changed is investigated. In their research they made use of the Prisoner’s Dilemma set-up and they only change the name of the game. They found that there is a difference in the cooperation level when the name of the game is different. Looking at communication, it is well know that communication increases the cooperation rate. One of the first studies to find this positive effect of communication is the study of Deutsch (1958). Multiple studies replicated the positive effect of communication on the cooperation in social dilemmas. (Balliet 2009; Bouas and Komorita 1996; Braver and Wilson 1986; Dawes, McTavish and Shaklee 1977; Isaac and Walker 1988; Kerr et al. 1997; Orbell van de Kragt and Dawes 1988; Ostrom and Walker 1991; Scodel et al. 1959). However, the interaction between these two effects in a Prisoner’s Dilemma is not well known and needs more research. Therefore, the following research question is formulated:

Is the effect of social framing in the Prisoner’s Dilemma different when you add communication?

To find the answer to this research question the following sub questions are formulated:

- Is there a difference in cooperation rate between a Wall Street game frame and a Community game frame?

- Is there a difference in cooperation rate when communication is added to the game?

To answer the research question an online survey is conducted. There are four different version of the survey and people are randomly assigned to one of the four treatments. In the survey two frames are used, the Community frame game and the Wall Street game frame, and both games have a version with and without communication. The only difference between the two frames with the same communication regime is the name; all other text in the survey is the same.

The thesis starts with a literature review about decision-making theory to explain how people make decisions and the effect of framing and communication in social dilemmas is explained and this in linked to decision-making theory. In the next part, the methodology is explained. The following section discusses the results. In the last section, there is a conclusion and discussion of the results.

1. Literature review

Prisoner’s Dilemma

The social dilemma used in this thesis is the Prisoner’s Dilemma. This dilemma is a popular social dilemma that is being used to investigate behavior of individuals. The original classic Prisoner’s Dilemma involves two prisoners, who are held in a separate police cell, both accused of a crime. They are unable to communicate with each other. When they both do not confess (CC) they can only be punished for a minor offence, each prisoners will get a one-year sentence. If one confesses and the other does not the one that confesses is free and the other gets a ten-year sentence (DC/CD). If both confess (DD), they each get a three-year sentence each. Figure 2.1 gives an overview of the potential pay-offs.

Figure 2.1: An example of the potential pay-off of the Prisoner’s Dilemma

As Figure 2.1 shows the best possible outcome in the case of a Prisoner’s Dilemma for suspect A is defecting while the other player cooperates (termed DC). The next best outcome is cooperation from both sides (CC) followed by mutual defection (DD). The worst outcome is the case when suspect A cooperates while the suspect B defects (CD). Thus in a Prisoner’s Dilemma looking at the individual the best outcomes are: DC>CC>DD>CD. These outcomes give both the individuals the incentive to defect. However, for total welfare it would be better if both play a cooperation strategy. There are different game settings of the Prisoner’s Dilemma. Sally (1995) presents an analysis of 35 years of studies about the Prisoner’s Dilemma. In this study cooperation in the dilemma is defined as “the percentage of total choices made in an experiment that benefit the overall group at the expense of the individual deciding” (Sally, 1995). Figure 2.2 shows that there are different cooperates rates in the different research that is done about the game. Of the studies reviewed in the paper, thirty of the studies confronted their subjects with the simple binary choice of the Dilemma (cooperate or defect). Three experiments gave subject a third choice , which would have benefit a subset of the total group , and the remaining four studies allowed a wider range of choices , that involved either points harvested from a common resource pool or shares of capital invested in a group exchange.

In total 130 treatments are pooled in Figure 2.2 which shows the distribution of the cooperation rates of the samples in the different treatments. The mean cooperation rate for the entire sample is 47.4 percent with a standard deviation of 23.8 percent. A slight majority of the treatments occur in the range from 20 to 50 percent, however it is clear that there are numerous experiments in which subjects cooperated very frequently and effectively (>50 percent).

Figure 2.2: Distribution of the cooperation rate of the samples in the paper (Sally, 1995)

Strategies

In the Prisoner’s Dilemma there are two types of games an one shot game and an iterated Prisoner’s Dilemma. In the case of the one shot game there is only one interaction and in the case of the iterated game there are multiple interactions. Looking at the game the collective pay-offs are greatest when both players cooperate, however each player gains a higher individual pay-off from defecting irrespective of the partner’s action. An individual that cooperates when his partner defects gets the lowest pay-off in the matrix. This means that mutual defection therefore represents both the Nash equilibrium (Nash, 1951) and the only evolutionarily stable strategy (ESS, Maynard-Smith, 1982) in one-shot interactions (Luce & Raiffa, 1957). However, a different situation occurs when there are multiple interactions in the game. In this case people can adapt their strategy to the behavior of the partner is the previous rounds. One famous strategy in the iterated Prisoner’s Dilemma is the tit-for-tat strategy. This starts with cooperating and thereafter respond to whatever the partner did in the previous round (Axelrod & Hamilton, 1981). There are also theories related to tit-for-tat strategy. Tit-for-tat and related strategies are similar in that behavior is typically predictable and information about the last round is used to inform current decision-making. As such, these strategies are referred to as ‘cost-counting’ or ‘bookkeeping’ strategies (Clutton-Brock, 2002, 2009).

Appropriateness framework

Weber, Kompelman and Messick (2004) discuss the appropriateness framework in there paper as a theory to explain the decisions made in social dilemmas. They say that the expected utility theory is good for explaining decision in social dilemmas when (1) the environment is less, rather than more social, (2) when the economic structure of the situation or context is salient and (C) when the situation or context calls for an approach with calculations. However, the main disadvantage of this model is the lack of accounting for social factors that are often involved in social dilemmas. Expected utility theory is designed for individual decision making without other individuals involved, which could have an effect on the outcome and in expected utility theory only risk is involved when making the decision.

The appropriateness framework is developed by March (1994). In this framework it is argued that decisions are shaped by situational recognitions, the application of rules and someone’s identity. When people are making a decision they form a decision based on the question "What does a person like me (identity) do (rules) in a situation like this (recognition)?"(cf. March , 1994; D.M. Messick, 1999). This approach contrasts with the logic of consequences or expected utility models. Messick (1999) suggests that the logic of appropriateness may have greater explanatory power in social dilemmas than expected utility models.

Figure 2.3 shows a schematic overview on how the appropriateness framework explains the decision-making process in social dilemmas. As seen in the figure the decision maker looks at the situation through a lens that is constituted by interaction between social cues and identity.

In the situation of a social dilemma, there can be different cues. There can be objective cues for example about who is involved, t is and what the name of the decision/social dilemma is. There are also cues related to personal history for example history with the situation, personal traits and your values. All these cues can have an effect on the interpretation of the situation. Idiosyncratic motivations may also affect the situational cues (e.g., Holmes, 1991; Kruglanski, 1996; Kunda, 1990; Weber, Malhotra, & Murnighan, 2004). Figure 2.3 also suggest that the situational cues can have an impact on the aspects of the identity of the individual, which then affects the situational construal, and the accessibility of particular event prototypes. When looking at experiments a certain group is in general more likely to be a participant in experiment. This selection can also have an effect on the decision. This interaction between identity and objective situational factors yields an initial definition of the situation. How the situation is defined is the heart of the framework. The definition of the situation should inform the person about the norms, expectations, rules, learned behaviors, skills and possible strategies that are relevant. This means that the definition of the situation suggest a choice set. When looking at this framework the factors that are in Table 1 can send cues and therefore have an effect on the decision people make. This theory can explain why people behave the way they behave in social dilemmas. Two of those aspects that can have an effect on the decision, framing and communication, are discussed in the following section since the focus of this thesis is on these aspects of the dilemma.

Figure 2.3: A schematic presentation of the appropriateness framework (from: Weber, Kompelman and Messick, 2004)

Framing

Framing in experiments is done in many different ways. The Asian disease example of Tversky and Kahneman (1981) is a famous example of framing and how it has an effect on the decision-making. In this scenario of a dilemma people had to decide between two treatments for 600 people that are suffering from the Asian disease. However, there were two different frames, one positive and one negative, of the treatments. These frames are in Table 2.2. During the experiment, one group got the positive framing and the other group got the negative framing.

Table 2.2: The frames in the Asian disease dilemma of Tversky and Kahneman (1981)

The result of the experiment was that in the case that the frame was positive 72 percent of the people chose treatment A and this is dropping to 22 percent when the negative frame is used. There are multiple studies that show the effect of framing. Gächter et al (2009) finds in a natural field experiment with PhD students that 93 percent of PhD students registered early when a penalty fee for late registration was emphasized and only 67 percent doing so when this was presented as a discount for earlier registration. Focusing on the Prisoner’s Dilemma, Eiser and Bhavnani (1974) find that behavior in a Prisoner’s Dilemma is more cooperative when the situation is framed as an “international negotiation” than when it is framed as a business transaction. Likewise, subjects cooperate more in a “social exchange study” than in a “business transaction study” (Batson and Moran, 1999), and substantially more in a “Community game” than in a “Wall Street game” (Kay and Ross, 2003). The study of Liberman et al (2004) is a famous study about framing in the Prisoner’s Dilemma. In their study, they reported about three different studies in total, all based on the Prisoner’s Dilemma. The first study compares behavior in a seven-round Prisoners’ dilemma under a game with the label “Wall Street game” to the corresponding behavior under a “Community Game” label. In this study they used a selected group of 48 male college students. The finding is that people are more willing to cooperate in the Community game frame. The second study used 40 Israeli pilot trainees, the labels Bursa Game (Wall Street Game) and Kommuna Game (Community game), all other factors are the same. In the second study, both the pilot trainees and their (flight) instructors are asked to make predictions about others first-round behavior. On average, the participants were more optimistic regarding others’ cooperation in the Kommuna Game than in the Bursa Game, but no such difference was observed among instructors. Moreover, participants expecting first round cooperation were relatively likely to cooperate in the Kommuna Game, but not in the Bursa Game. In both studies, cooperation rates were significantly higher under the Community/Kommuna Game frame. Finally, in the third study, college students who had not participated in Study 1 were asked to predict first-round choices. Like the flight instructors in Study 2, these subjects failed to predict the large difference in cooperation rates between the two frames, suggesting that beliefs depend on whether one is a participant in the situation or not.