nep-soc New Economics Papers
on Social Norms and Social Capital
Issue of 2007‒09‒02
thirteen papers chosen by
Fabio Sabatini
University of Rome, La Sapienza

  1. The Law of the Few By Andrea Galeotti; Sanjeev Goyal
  2. Can Anyone Be “The” One? Field Evidence on Dating Behavior By Michèle Belot; Marco Francesconi
  3. How Social Reputation Networks Interact with Competition in Anonymous Online Trading: An Experimental Study By Gary E Bolton; Claudia Loebbecke; Axel Ockenfels
  4. A Theory of Strategic Diffusion By Andrea Galeotti; Sanjeev Goyal
  5. Beliefs in Network Games By Kets, W.
  6. Do the right thing: But only if others do so By Bicchieri, Cristina; Erte, Xiao
  9. Gender, Older People and Social Exclusion. A Gendered Review and Secondary Analysis of the Data By Emilia Del Bono; Caroline Gunnell; Ruth Hancock; Lavinia Parisi; Emanuela Sala
  10. Prior knowledge and entrepreneurial innovative success By Uwe Cantner; Maximilian Goethner; Andreas Meder
  11. The Limits of Trust in Economic Transactions - Investigations of Perfect Reputation Systems By Gary E Bolton; Axel Ockenfels
  12. Are All Democracies Equally Good? The Role of Interactions between Political Environment and Inequality for Rule of Law By Uwe Sunde; Matteo Cervellati; Piergiuseppe Fortunato
  13. Keeping Up With The Schmidts: An Empirical Test of Relative Deprivation Theory in the Neighbourhood Context By Simon Burgess; Gundi Knies; Carol Propper

  1. By: Andrea Galeotti; Sanjeev Goyal
    Abstract: The law of the few refers to the following empirical phenomenon: in social groups a very small subset of individuals invests in collecting information while the rest of the group invests in forming connections with this select few. In many instances, there are no observable differences in characteristics between those who invest in information and those who invest in forming connections. This paper shows that the law of few naturally emerges in environments with identical rational agents. We develop a strategic game in which players have the opportunity to invest in collecting information as well as in investing in bilateral connections with others. We find that every strict equilibrium of this game exhibits the ‘law of the few’. We also show that this pattern of social differentiations is efficient in some cases.
    Date: 2007–08–29
  2. By: Michèle Belot (Department of Economics, University of Essex); Marco Francesconi (Department of Economics, University of Essex)
    Abstract: Much empirical evidence shows that female and male partners look alike along a variety of attributes. It is however unclear whether this positive sorting is the result of either assortative or agreed-upon preferences or of meeting opportunities. We assess the nature of dating preferences and the relative importance of preferences and opportunities in dating behavior using unique new data from a large commercial speed dating agency. We find that both women and men value physical attributes, such as age and weight, and that preferences are assortative along age, height, and education. The role of preferences, however, is outplayed by that of opportunities. Along some attributes (such as education, occupation and smoking) opportunities explain more than two-thirds of the estimated variation in demand. Along other attributes (such as age), the role of preferences is more substantial, but never dominant. These results will have important implications for our understanding of the degree of social openness and mobility.
    Date: 2007–07
  3. By: Gary E Bolton; Claudia Loebbecke; Axel Ockenfels
    Abstract: Many Internet markets rely on ‘feedback systems’, essentially social networks of reputation, to facilitate trust and trustworthiness in anonymous transactions. Market competition creates incentives that arguably may enhance or curb the effectiveness of these systems. We investigate how different forms of market competition and social reputation networks interact in a series of laboratory online markets, where sellers face a moral hazard. We find that competition in strangers networks (where market encounters are one-shot) most frequently enhances trust and trustworthiness, and always increases total gains-from-trade. One reason is that information about reputation trumps pricing in the sense that traders usually do not conduct business with someone having a bad reputation not even for a substantial price discount. We also find that a reliable reputation network can largely reduce the advantage of partners networks (where a buyer and a seller can maintain repeated exchange with each other) in promoting trust and trustworthiness if the market is sufficiently competitive. We conclude that, overall, competitive online markets have more effective social reputation networks.
    Date: 2007–08–01
  4. By: Andrea Galeotti; Sanjeev Goyal
    Abstract: The important role of friends, neighbors and colleagues in shaping individual choices has been brought out in a number of studies over the years. The presence of significant 'local' influence in shaping individual behavior suggests that firms, governments and developmental agencies should explicitly incorporate it in the design of their marketing and developmental strategies. This paper develops a framework for the study of optimal strategies in the presence of social interaction. We focus on the case of a single player who exerts costly effort to get a set of individuals – engaged in social interaction – to choose a certain action. Our formulation allows for different types of social interaction and also allows for the player to have incomplete information concerning the connections among individuals. We first show that incorporating information on social interaction can have large effects on the profits of a player. Then, we establish that an increase in the level and dispersion of social interaction can raise or lower the optimal strategy and profits of the player, depending on the content of the interaction. Finally, we study the value of social network information for the player and find that it depends on the dispersion in social connections. The economic interest of these results is illustrated via a discussion of two economic applications: advertising in the presence of word of mouth communication and seeding a network.
    Date: 2007–08–29
  5. By: Kets, W. (Tilburg University, Center for Economic Research)
    Abstract: Networks can have an important effect on economic outcomes. Given the complexity of many of these networks, agents will generally not know their structure. We study the sensitivity of game-theoretical predictions to the specification of players? (common) prior on the network in a setting where players play a fixed game with their neighbors and only have local information on the network structure. We show that two priors are close in a strategic sense if and only if (1) the priors assign similar probabilities to all events that involve a player and his neighbors, and (2) with high probability, a player believes, given his type, that his neighbors? conditional beliefs are similar, and that his neighbors believe, given their type, that. . . the conditional beliefs of their neighbors are similar, for any number of iterations. Also, we show that the common but unrealistic assumptions that the size of the network is common knowledge or that the types of players are independent are far from innocuous: if these assumptions are violated, small probability events can have a large effect on outcomes through players? conditional beliefs.
    Keywords: Network games;incomplete information;higher order beliefs;continuity;random networks;population uncertainty.
    JEL: C72 D82 L14 Z13
    Date: 2007
  6. By: Bicchieri, Cristina; Erte, Xiao
    Abstract: Social norms play an important role in individual decision making. Bicchieri (2006) argues that two different expectations influence our choice to obey a norm: what we expect others to do (empirical expectations) and what we believe others think ought to be done (normative expectations). Little is known about the relative importance of these two types of expectation in individuals’ decisions, an issue that is particularly important when normative and empirical expectations are in conflict (e.g., high crime cities). In this paper, we report data from Dictator game experiments where we exogenously manipulate dictators’ expectations in the direction of either selfishness or fairness. When normative and empirical expectations are in conflict, we find that empirical expectations about other dictators’ choices significantly predict a dictator’s own choice. However, dictators’ expectations regarding what other dictators think should be done do not have a significant impact on their decisions. Our findings about the crucial influence of empirical expectations are important for those who design institutions or policies aimed at discouraging undesirable behavior.
    Keywords: social norms; expectations; dictator game; experimental economis
    JEL: C91 C72
    Date: 2007–08–25
  7. By: Friederike Mengel (Universidad de Alicante); Veronika Grimm (Universidad de Alicante)
    Abstract: We experimentally investigate the effect of population viscosity (an increased probability to interact with others of one's type or group) on cooperation in a standard prisoner's dilemma environment. Subjects can repeatedly choose between two groups that differ in the defector gain in the associated prisoner's dilemma. Choosing into the group with the smaller defector-gain can signal one's willingness to cooperate. The degree of viscosity is varied across treatments. We find that viscosity produces an endogenous sorting of cooperators and defectors and persistently high rates ofcooperation. Higher viscosity leads to a sharp increase in overall cooperation rates and in addition positively affects the subjects' intrinsic willingness to cooperate.
    Keywords: Experiments, Cooperation, Group Selection, Norms, Population
    JEL: C70 C73 C90
    Date: 2007–08
  8. By: Brice Corgnet (Universidad de Navarra)
    Abstract: We develop a model of team formation in which workers learn about their level of ability. We show that insufficient cooperation may arise as workers learn positively about their own skills. We then build a model for team managers and establish that their objectivity in assessing coworkers' abilities may facilitate cooperation among agents. This is the case because managers are able to design team contracts based on workers' true performances. Our work provides a motive for the existence of team managers in theabsence of asymmetry of information. We develop a model of team formation in which workers learn about their level of ability. We show that insufficient cooperation may arise as workers learn positively about their own skills. We then build a model for team managers and establish that their objectivity in assessing coworkers¿ abilities may facilitate cooperation among agents. This is the case because managers are able to design team contracts based on workers¿ true performances. Our work provides a motive for the existence of team managers in theabsence of asymmetry of information.
    JEL: C70 C73 C90
    Date: 2007–08
  9. By: Emilia Del Bono (Institute for Social and Economic Research); Caroline Gunnell (Epping Forest Primary Care Trust); Ruth Hancock (Department of Health and Human Sciences, University of Essex); Lavinia Parisi (Institute for Social and Economic Research); Emanuela Sala (Institute for Social and Economic Research)
    Abstract: This study describes the conditions of older men and women in the UK and highlights gender differences in their degree of social inclusion, here defined with respect to: (i) use of services, (ii) provision of care, and (iii) participation in social networks. Using the 2001 Sample of Anonimised Records (SARs) we look at the current situation of older people (here defined as people aged 65 and over) in Britain. We document important gender imbalances in the age structure and marital status of older people, but point out that these differences will become less marked in the future according to the Government Actuary's projections. Using data from the General Household Survey we then investigate the extent of gender differences in older people's degree of social inclusion. We find evidence that differences among older men and women with respect to service utilization, provision of informal care and participation in social networks are often the consequence of differences in marital status and living arrangements rather than gender differences per se.
    Date: 2007–07
  10. By: Uwe Cantner (School of Business and Economics, Friedrich-Schiller University Jena, Germany); Maximilian Goethner (School of Business and Economics, Friedrich-Schiller University Jena, Germany); Andreas Meder (School of Business and Economics, Friedrich-Schiller University Jena, Germany)
    Abstract: This paper is concerned with the relationship between innovative success of entrepreneurs and their prior knowledge at the stage of firm formation. We distinguish between different kinds of experience an entrepreneur can possess and find evidence that the innovative success subsequent to firm formation is enhanced by entrepreneur's prior technological knowledge but not by prior market and organizational knowledge. Moreover we find that prior technological knowledge gathered through embeddedness within a research community has an additionally positive influence on post start-up innovative success. This is a first hint towards the importance of collective innovation activities.
    Keywords: Entrepreneurship, Networks, Prior knowledge
    JEL: L25 O31 Z13
    Date: 2007–08–27
  11. By: Gary E Bolton; Axel Ockenfels
    Date: 2007–08–02
  12. By: Uwe Sunde (IZA, University of Bonn and CEPR); Matteo Cervellati (University of Bologna, IAE Barcelona and IZA); Piergiuseppe Fortunato (University of Bologna and United Nations)
    Abstract: Using cross-country data, we find evidence for a significant negative interaction effect between democracy and inequality in determining the quality of growth-promoting institutions like rule of law. Democracy is associated with institutions of higher quality when inequality is lower.
    Keywords: inequality, democracy, institutions, rule of law, interactions
    JEL: O43 P48 P14
    Date: 2007–08
  13. By: Simon Burgess (University of Bristol); Gundi Knies (Institute for Social and Economic Research); Carol Propper (University of Bristol)
    Abstract: We test empirically whether people’s life satisfaction depends on their relative income position in the neighbourhood, drawing on a unique dataset, the German Socio-economic Panel Study (SOEP) matched with micro-marketing indicators of population characteristics. Relative deprivation theory suggests that individuals are happier the better their relative income position in the neighbourhood is. To test this theory we estimate micro-economic happiness models for the years 1994 and 1999 with controls for own income and for neighbourhood income at the zip-code level (roughly 9,000 people). There exist no negative and no statistically significant associations between neighbourhood income and life satisfaction, which refutes relative deprivation theory. If anything, we find positive associations between neighbourhood income and happiness in all cross-sectional models and this is robust to a number of robustness tests, including adding in more controls for neighbourhood quality, changing the outcome variable, and interacting neighbourhood income with indicators that proxy the extent to which individuals may be assumed to interact with their neighbours. We argue that the scale at which we measure neighbourhood characteristics may be too large still to identify the comparison effect sought after.
    Date: 2007–08

This nep-soc issue is ©2007 by Fabio Sabatini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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