Dictator Controls for Moonlighting Game

Let's consider two different dictator controls for this game.

Moonlighting Game Dictator Control 1:

Dictator Control 1 (MGDC1) is a variation of the moonlighting game when the second mover has no decision to make, i.e. the first mover becomes a dictator. Thus the first mover can either give money to the second mover or take money from him/her. The maximum amount that can be given is the whole endowment of the first player; the maximum amount taken, however, is only $5, i.e. half of the second mover’s endowment. Money given is increased by a multiplicative factor greater than 1, say equal to 3, while any amount taken is not transformed. The game ends after the move of player 1.

IMPORTANT OBSERVATION: The Moonlighting Game Dictator Control 1 eliminates the possible motives of trust in positive reciprocity and fear of negative reciprocity that might be present in player 1’s behavior when playing the original moonlighting game. Altruism is the only positive motive for the first mover to send a positive amount in this dictator treatment.

Overview

• There are 2 players participating in the game: player 1 and player 2.
• At the beginning of the game both players are endowed with $10.
• Player 1 decides whether to pass some of his money to player 2, take away money from him or neither send nor take anything.
• Maximum amount that can be passed is $10, maximum amount that can be taken is $5.
• Any amount passed is tripled by the experimenter; any amount taken is not transformed.
• Player 2 does not make any decision.

Nash Prediction for Self-Regarding Preferences

The unique Nash prediction for player 1 with self-regarding preferences is to take the maximum of $5 from player 2.

Moonlighting Game Dictator Control 2

Moonlighting Game Dictator Control 2 (MGDC2) is a variation of the moonlighting game when the first mover has no decision to make and the second mover is given an initial endowment (say, $10) plus additional money equal to the amount that he/she would receive in the moonlighting game. This is done for all pairs of movers. They are also informed about the relation between the additional amount they receive and the endowment of the randomly and anonymously paired first mover. The second mover's strategy is the same as in the moonlighting game and the only difference is that the observed allocation was not generated by the first mover.

IMPORTANT OBSERVATION: The Moonlighting Game Dictator Control 2 eliminates the possible motives of positive reciprocity and negative reciprocity that might be present in players’ behavior when playing the moonlighting game.

Overview

• There are 2 players participating in the game: player 1 and player 2.
• Player 1 is endowed with $10+A, player 2 with $10+B where B=-3A, if A<=0 and B=-A, if A>0 are determined in the Moonlighting Game.
• Player 1 does not make a decision.
• Before making his/her move player 2 knows the endowments and the relation between the additional amount he/she received and the endowment of player 1.
• Player 2 can now choose to take or return some money to player 1.
• Each dollar given by player 2 to player 1 costs player 2 one dollar and each dollar taken by player 2 from player 1 costs the second mover 33 cents.

Nash Prediction for Self-Regarding Preferences

The game triad is a three-games design that includes the Moonlighting Game and Moonlighting Game Dictator Controls 1 and 2. The use of three games and the comparison of players’ decisions in them enables one to discriminate between actions motivated by unconditional preferences over the distribution of monetary payoffs and actions motivated by attribution of the intentions of others.

Comparison of behavior of the first mover in the baseline moonlighting game treatment with the dictator control MGDC1 treatment when the second mover does not have a decision to make allows one to distinguish among some alternative motives that could be attributed to actions of the first mover. If the first mover sends a significantly higher amount in moonlighting game than in the MGDC1 treatment it can be motivated either by trust in positive reciprocity or by fear of negative reciprocity.

Consider a first mover that sends zero in moonlighting game and takes the maximum of $5 in MGDC1. This means that he/she prefers to take money from the second mover, but does it only in a situation when the second mover cannot punish because of the fear of negative reciprocity. On the other hand, a mover characterized by self-regarding preferences who is not afraid of retaliation would take money in both treatments. Another scenario is sending is taking money in MGDC1 and sending a positive amount in moonlighting game and it corresponds to a selfish first mover exhibiting a trust in positive reciprocity by the second mover.

A comparison of responses of the second mover in moonlighting game and DC2MG reveals whether the behavior of second movers in moonlighting game is or is not characterized by positive or negative reciprocity (to distinguish between the positive and negative reciprocity one has to look at the outcomes after the stage 1 in both treatments and the following behavior of the second mover).

Cox, Sadiraj, and Sadiraj [2004] found out that players 1 behaved differently when they were dictators as opposed to a situation when paired players 2 could respond to their a decisions. In the moonlighting game they observe that the behavior of players 1 is characterized by trust in positive reciprocity and they also notice that the first players are not afraid of negative reciprocity: 12 out of 30 players 1 took the maximum possible amount of 5, 1 player took 2, 3 players "sent" zero and 14 players gave positive amounts to the paired player 2. In MGDC1 25 out of 27 players 1 took money and only two players exhibited altruism by sending positive amounts. Thus, the behavior of players 1 is not characterized by significant altruism. Furthermore, it can be concluded from the study that behavior of only 11% of first movers is consistent with fear of negative reciprocity and 47% exhibited trust.

In the same study 14 players 2 received positive amounts of money sent by paired players 2 in moonlighting game and were provided by the experimenters in MGDC2. In the moonlighting game 11 returned positive amounts to players 1 and 3 kept all the money. In MGDC2 11 players 2 kept all the money and only 3 returned some positive amounts. The comparison of the data suggests that the behavior of players 2 in the moonlighting game is characterized by significant positive reciprocity.

For a manually run experiment, see the instructions and consult Servátka[2003].

Further Readings:

• Abbink, Klaus, Bernd Irlenbusch, and Elke Renner, "The Moonlighting Game: An Empirical Study on Reciprocity and Retribution." Journal of Economic Behavior and Organization, 42, 2000, pp.265-77.
• Cox, James C., Daniel Friedman, and Steven Gjerstad, "A Tractable Model of Reciprocity and Fairness," University of Arizona discussion paper, 2004.
• Cox, James C., Klarita Sadiraj, and Vjollca Sadiraj, "Implications of Trust, Fear, and Reciprocity for Modeling Economic Behavior," University of Arizona discussion paper, 2004.
• Servátka Maroš, “Reciprocity and Reputation,” University of Arizona discussion paper, 2003.