Suppose someone were to forgo a personal gain in order to help you out. Would you return the
favour? And if you were to act first, could you trust the other person to reciprocate? To investigate
the circumstances under which people do reciprocate, new economic research has confronted
people with this type of dilemma in controlled laboratory experiments where they earn money
depending on their decisions. As economists would predict, most people - 70% - behaved
selfishly. But a substantial minority didn't - and they ended up with higher earnings than the
selfish people.
The economic experiments were conducted by researchers Kenneth Clark and Martin Sefton
using 240 volunteer subjects - students enrolled at the University of Manchester and Penn State
University in the United States. The results are published in the latest issue of the Economic
Journal.
The experiments were based on the idea of the 'Prisoner's Dilemma' in which two prisoners are
held in separate cells and can decide whether to confess or stay silent. Each prisoner has a private
incentive to confess, but each would be better off if they both stayed silent. The Prisoner's
Dilemma has been widely used by economists and other social scientists as representative of
situations where individual and collective interests diverge. More recently, Channel Four's Trust
Me series, hosted by Nick Bateman, has used a version of the Prisoner's Dilemma as the basis for a
game show.
In the experiments, each subject was randomly and anonymously paired with another subject.
Each partner then chose between a selfish or co-operative action, making his or her decision in
turn. Thus, the 'first-mover' might behave co-operatively if they trust the 'second-mover' to
reciprocate, although the standard economic prediction, based on the assumption that each will
follow their own interests, is that both will act selfishly.
The results were broadly similar for male and female students; and for US and UK students. By
far the most common outcome - nearly 70% of all trials - was for both subjects to behave selfishly,
in line with the economist's pessimistic view of human nature. But this left a large minority cooperating,
enabling the researchers to investigate the factors that encourage co-operation.
It was clear that co-operation was based on reciprocal behaviour: when the first-mover was
selfish, the second-mover was almost always selfish as well; while when the first-mover acted cooperatively,
around one-third of second-movers reciprocated.
Also, from looking at how second-movers responded to co-operative first-movers, the main
influence on reciprocation turned out to be how much it cost to reciprocate, measured by the
money that the second-mover would forgo in order to bring about the mutually advantageous
outcome. Where this cost was higher, reciprocation was much less likely, suggesting that unselfish
behaviour responds predictably to its 'price.'
One might think that those who chose to act selfishly would earn the most. But this was not
always the case. When the cost of reciprocation was low, co-operative first-movers averaged 45%
higher earnings than selfish first-movers, suggesting that 'nice guys don't always finish last'. What
is more, if there are other like-minded people around, co-operation may be the best policy.
ENDS
Note for Editors: 'The Sequential Prisoner's Dilemma: Evidence on Reciprocation' by Kenneth
Clark and Martin Sefton is published in the January 2001 issue of the Economic Journal. Clark is
at the University of Manchester; Sefton at the University of Nottingham. The research was funded
by the Faculty of Economics and Social Studies at the University of Manchester and by the
Nuffield Foundation.
For Further Information: contact Ken Clark on 0161-275-3679 (email: ken.clark@man.ac.uk);
RES Media Consultant Romesh Vaitilingam on 0117-983-9770 or 07768-661095 (email:
romesh@compuserve.com); or RES Media Assistant Niall Flynn on 020-7878-2919 (email:
nflynn@cepr.org).