This chapter looks at the whether behavioral economics can be used by policy-makers to help people make better choices. It illustrates the importance of institutions, this will take us into the world of practical policy design and intervention. The chapter shows that institutions can be of two basic kinds: formal institutions, such as markets, and informal institutions, such as social norms. In recent years there has been much excitement that behavioral economics can change the way in which policy is viewed when it comes to individual incentives. The opens up interesting new ways to think of economics and policy, informed by behavioral economics. The mindspace principles are designed to help policy-makers better understand how possible policies might change behavior; they are a kind of checklist of things to think about. The Institute for Government has come up with the idea of mindspace. In many instances …

Two experiments utilized a new experimental paradigm – the IPD-MD game – to study how relative deprivation at the group level affects intergroup competition. The IPD-MD game enables group members to make a costly contribution to either a within-group pool that benefits fellow in-group members, or a between-group pool, which, in addition harms out-group members. We found that when group members were put in a disadvantaged position, either by previous actions of the out-group (Experiment 1) or by random misfortune (Experiment 2), they contributed substantially more to the competitive between-group pool. This destructive behavior both minimized inequality between the groups and reduced collective efficiency. Our results underscore the conditions that lead group members to care about relative (rather than absolute) group outcomes and highlight the need to differentiate between the motivation to get ahead and the motivation not to fall behind: the latter, it appears, is what motivates individual participation in destructive intergroup competition.

We investigate experimentally the underlying motivations and individual dierences with regard to the participation in between-group conflict in nested social dilemmas. In our nested social dilemmas, the collective is divided into two groups, and individuals allocate tokens between a private, a group-specific, and a collective good. We vary the marginal per capita return of the group-specific and collective good in order to manipulate the motivational within- and between group conflicts. A first experiment shows that a between-group conflict leads to within-group cooperation and particularly individuals with positive other-regarding preferences (prosocials) react to a between-group conflict by contributing to the group-specific good. Hence, paradoxically, individuals with positive other-regarding preferences may foster between-group conflicts. A second experiment reveals that prosocials' contributions to the group-specific or collective good vary as a function of the personal costs of within-group versus collective cooperation, supporting the weighted average social preference theory by Charness and Rabin (2002).

Three computer-controlled experiments were conducted to study interactions between individuals and non-cooperative groups in prototypical social-dilemma games. The asymmetric competition between an individual and a group was compared with symmetric control conditions where both competitors were either individuals or groups. All games were played repeatedly with the same players interacting for 120 rounds. The results show that the outcome of the conflict depends both on the type of competing players and on the structure of the competition. Generally, individuals do better than non-cooperative groups, regardless of the type of conflict, and more often than not it is better to have a non-cooperative group rather than an individual as an opponent. The relative advantage is a result of individuals generally cooperating better with other individuals (as compared to cooperation between two groups), and that in mixed competitions the individual takes advantage of the group's difficulties in mobilizing collective-action, and dominates it. (C) 2012 Elsevier Inc. All rights reserved.

In today's increasingly interconnected world, deciding with whom and at what level to cooperate becomes a matter of increasing importance as societies become more globalized and large-scale cooperation becomes a viable means of addressing global issues. This tension can play out via competition between local (e.g. within a group) and global (e.g., between groups) interests. Despite research highlighting factors influencing cooperation in such multi-layered situations, their biological basis is not well understood. In a double-blind placebo controlled study, we investigated the influence of intranasally administered oxytocin and arginine vasopressin on cooperative behavior at local and global levels. We find that oxytocin causes an increase in both the willingness to cooperate and the expectation that others will cooperate at both levels. In contrast, participants receiving vasopressin did not differ from those receiving placebo in their cooperative behavior. Our results highlight the selective role of oxytocin in intergroup cooperative behavior.

Costly individual participation in intergroup conflict can be motivated by ‘‘in-group love’’—a cooperative motivation to help the in-group, by ‘‘out-group hate’’—an aggressive or competitive motivation to hurt the out-group, or both. This study employed a recently developed game paradigm (Halevy, Bornstein, & Sagiv, 2008) designed specifically to distinguish between these two motives. The game was played repeatedly between two groups with three players in each group. In addition, we manipulated the payoff structure of the interaction that preceded the game such that half of the groups experienced peaceful coexistence and the other half experienced heightened conflict prior to the game. Enabling group members to express in-group love independently of out-group hate significantly reduced intergroup conflict. Group members strongly preferred to cooperate within their group, rather than to compete against the out-group for relative standing, even in the condition in which the repeated game was preceded by conflict. Although both ‘‘in-group love’’ and ‘‘out-group hate’’ somewhat diminished as the game continued (as players became more selfish), choices indicative of the former motivation were significantly more frequent than choices indicative of the latter throughout the interaction. We discuss the implications of these findings for conflict resolution. Copyright # 2011 John Wiley & Sons, Ltd.

The genetic origins of altruism, defined here as a costly act aimed to benefit non-kin individuals, have not been examined in young children. However, previous findings concerning adults pointed at the arginine vasopressin receptor 1A (AVPR1A) gene as a possible candidate. AVPR1A has been associated with a range of behaviors including aggressive, affiliative and altruistic phenotypes, and recently a specific allele (327 bp) of one of its promoter region polymorphisms (RS3) has been singled out in particular. We modeled altruistic behavior in preschoolers using a laboratory-based economic paradigm, a modified dictator game (DG), and tested for association between DG allocations and the RS3 “target allele.” Using both population and family-based analyses we show a significant link between lower allocations and the RS3 “target allele,” associating it, for the first time, with a lower proclivity toward altruistic behavior in children. This finding helps further the understanding of the intricate mechanisms underlying early altruistic behavior.

Explaining human cooperation in large groups of non-kin is a major challenge to both rational choice theory and the theory of evolution. Recent research suggests that group cooperation can be explained by positing that cooperators can punish non-cooperators or cheaters. The experimental evidence comes from public goods games in which group members are fully informed about the behavior of all others and cheating occurs in full view. We demonstrate that under more realistic information conditions, where cheating is less obvious, punishment is much less effective in enforcing cooperation. Evidently, the explanatory power of punishment is constrained by the visibility of cheating.

Two experiments utilized a new experimental paradigm—the Intergroup Prisoner’s Dilemma— Maximizing Difference (IPD-MD) game—to study how relative deprivation at the group level affects intergroup competition. The IPD-MD game enables group members to make a costly contribution to either a within-group pool that benefits fellow ingroup members, or a between-group pool, which, in addition, harms outgroup members. We found that when group members were put in a disadvantaged position, either by previous actions of the outgroup (Experiment 1) or by random misfortune (Experiment 2), they contributed substantially more to the competitive between-group pool. This destructive behavior both minimized inequality between the groups and reduced collective efficiency. Our results underscore the conditions that lead group members to care about relative (rather than absolute) group outcomes and highlight the need to differentiate between the motivation to get ahead and the motivation not to fall behind: the latter, it appears, is what motivates individual participation in destructive intergroup competition.

Background: Economic games observe social decision making in the laboratory that involves real money payoffs. Previously we have shown that allocation of funds in the Dictator Game (DG), a paradigm that illustrates costly altruistic behavior, is partially determined by promoter-region repeat region variants in the arginine vasopressin 1a receptor gene (AVPR1a). In the current investigation, the gene encoding the related oxytocin receptor (OXTR) was tested for association with the DG and a related paradigm, the Social Values Orientation (SVO) task.Methodology/Principal Findings: Association (101 male and 102 female students) using a robust-family based test between 15 single tagging SNPs (htSNPs) across the OXTR was demonstrated with both the DG and SVO. Three htSNPs across the gene region showed significant association with both of the two games. The most significant association was observed with rs1042778 (p = 0.001). Haplotype analysis also showed significant associations for both DG and SVO. Following permutation test adjustment, significance was observed for 2-5 locus haplotypes (p < 0.05). A second sample of 98 female subjects was subsequently and independently recruited to play the dictator game and was genotyped for the three significant SNPs found in the first sample. The rs1042778 SNP was shown to be significant for the second sample as well (p = 0.004, Fisher's exact test).Conclusions: The demonstration that genetic polymorphisms for the OXTR are associated with human prosocial decision making converges with a large body of animal research showing that oxytocin is an important social hormone across vertebrates including Homo sapiens. Individual differences in prosocial behavior have been shown by twin studies to have a substantial genetic basis and the current investigation demonstrates that common variants in the oxytocin receptor gene, an important element of mammalian social circuitry, underlie such individual differences.

What motivates individual self-sacrificial behavior in intergroup conflicts? Is it the altruistic desire to help the in-group or the aggressive drive to hurt the out-group? This article introduces a new game paradigm, the intergroup prisoner's dilemma-maximizing difference (IPD-MD) game, designed specifically to distinguish between these two motives. The game involves two groups. Each group member is given a monetary endowment and can decide how much of it to contribute. Contribution can be made to either of two pools, one that benefits the in-group at a personal cost and another that, in addition, harms the out-group. An experiment demonstrated that contributions in the IPD-MD game are made almost exclusively to the cooperative, within-group pool. Moreover, preplay intragroup communication increases intragroup cooperation, but not intergroup competition. These results are compared with those observed in the intergroup prisoner's dilemma game, in which group members' contributions are restricted to the competitive, between-group pool.

In this paper I classify situations of interdependent decision-making, or games based on the type of decision-makers, or players involved. The classification builds on a distinction between three basic types of decision-making agents: individuals, cooperative or unitary groups -- groups whose members can reach a binding (and costless) agreement on a joint strategy -- and non-cooperative groups -- groups whose members act independently without being able to make a binding agreement. Pitting individuals, unitary groups, and non-cooperative groups against one another, and adding Nature as a potential “opponent”, generates a 3 (type of agent) X 4 (type of opponent) matrix of social situations. This framework is used to review the experimental decision-making literature and point out the gaps that still exist in it.

Converging evidence from both human and animal studies has highlighted the pervasive role of two neuropeptides, oxytocin (OXT) and arginine vasopressin (AVP), in mammalian social behaviours. Recent molecular genetic studies of the human arginine vasopressin 1a (AVPR1a) and oxytocin (OXTR) receptors have strengthened the evidence regarding the role of these two neuropeptides in a range of normal and pathological behaviours. Significant association between both AVPR1a repeat regions and OXTR single nucleotide polymorphisms (SNPs) with risk for autism has been provisionally shown which was mediated by socialization skills in our study. AVPR1a has also been linked to eating behaviour in both clinical and non-clinical groups, perhaps reflecting the social and ritualistic side of eating behaviour. Evidence also suggests that repeat variations in AVPR1a are associated with two other social domains in Homo sapiens: music and altruism. AVPR1a was associated with dance and musical cognition which we theorize as reflecting the ancient role of this hormone in social interactions executed by vocalization, ritual movement and dyadic (mother-offspring) and group communication. Finally, we have shown that individual differences in allocation of funds in the dictator game, a laboratory game of pure altruism, is predicted by length of the AVPR1a RS3 promoter-region repeat echoing the mechanism of this hormone's action in the vole model of affiliative behaviours and facilitation of positive group interactions. While still in its infancy, the current outlook for molecular genetic investigations of AVP-OXT continues to be fascinating. Future studies should profitably focus on pharmacogenomic and genomic imaging strategies facilitated by the ease and efficacy of manipulating AVP-OXT neurotransmission by intranasal administration. Importantly, physiological measures, behavioural paradigms and brain activation can be informed by considering between-group and also within-group individual differences defined by common polymorphisms. Ultimately, investigators should strive to develop a cohesive model explaining how genomic variations are translated into individual and group differences in higher-order social behaviours.

Human altruism is a widespread phenomenon that puzzled evolutionary biologists since Darwin. Economic games illustrate human altruism by showing that behavior deviates from economic predictions of profit maximization. A game that most plainly shows this altruistic tendency is the Dictator Game. We hypothesized that human altruistic behavior is to some extent hardwired and that a likely candidate that may contribute to individual differences in altruistic behavior is the arginine vasopressin 1a (AVPR1a) receptor that in some mammals such as the vole has a profound impact on affiliative behaviors. In the current investigation, 203 male and female university students played an online version of the Dictator Game, for real money payoffs. All subjects and their parents were genotyped for AVPR1a RS1 and RS3 promoter-region repeat polymorphisms. Parents did not participate in online game playing. As variation in the length of a repetitive element in the vole AVPR1a promoter region is associated with differences in social behavior, we examined the relationship between RS1 and RS3 repeat length (base pairs) and allocation sums. Participants with short versions (308-325 bp) of the AVPR1a RS3 repeat allocated significantly (likelihood ratio = 14.75, P = 0.001, df = 2) fewer shekels to the 'other' than participants with long versions (327-343 bp). We also implemented a family-based association test, UNPHASED, to confirm and validate the correlation between the AVPR1a RS3 repeat and monetary allocations in the dictator game. Dictator game allocations were significantly associated with the RS3 repeat (global P value: likelihood ratio chi(2) = 11.73, df = 4, P = 0.019). The association between the AVPR1a RS3 repeat and altruism was also confirmed using two self-report scales (the Bardi-Schwartz Universalism and Benevolence Value-expressive Behavior scales). RS3 long alleles were associated with higher scores on both measures. Finally, long AVPR1a RS3 repeats were associated with higher AVPR1a human post-mortem hippocampal messenger RNA levels than short RS3 repeats (one-way analysis of variance (ANOVA): F = 15.04, P = 0.001, df = 14) suggesting a functional molecular genetic basis for the observation that participants with the long RS3 repeats allocate more money than participants with the short repeats. This is the first investigation showing that a common human polymorphism, with antecedents in lower mammals, contributes to decision making in an economic game. The finding that the same gene contributing to social bonding in lower animals also appears to operate similarly in human behavior suggests a common evolutionary mechanism.

What motivates individual self-sacrificial behavior in intergroup conflicts? Is it the altruistic desire to help the ingroup or the aggressive drive to hurt the outgroup? This paper introduces a new game paradigm, the Intergroup Prisoner's Dilemma - Maximizing Difference (IPD-MD) game, designed specifically to distinguish between these two motives. The game involves two groups. Each group member is given a monetary endowment and can decide how much of it to contribute. Contribution can be made to either of two pools, one which benefits the ingroup at a personal cost, and another which, in addition, harms the outgroup. An experiment demonstrated that contributions in the IPD-MD game are made almost exclusively to the cooperative within-group pool. Moreover, pre-play intragroup communication increases intragroup cooperation but not intergroup competition. These results are compared with those observed in the Intergroup Prisoner's Dilemma (IPD) game, where group members' contributions are restricted to the competitive between-group pool.

We conducted an experimental study of price competition in a duopolistic market. The market was operationalized as a repeated game between two “teams” with one, two, or three players in each team. We found that asking (and winning) prices were significantly higher in competition between individuals than in competition between two- or three-person teams. There were no general effects of team size, but prices increased with time when each team member was paid his or her own asking price and decreased when the team's profits were divided equally. This result is consistent with a simple model of individual learning.

We compare the behavior of groups and individuals in a two-person trust game. The first mover in this game, the sender, receives an endowment and can send any part of it to the responder; the amount sent is tripled, and the responder can then return to the sender any portion of the tripled sum. In a 2 × 2 design, the players in the roles of sender and responder are either individuals or groups of three players (who conduct face-to-face discussions to decide on a collective group strategy). We find that groups in the role of sender send smaller amounts than individuals, and expect lower returns. In particular, groups send nothing more often than individuals do (and are even more likely to do so when the responder is another group). Groups and individuals in the role of responder return on average the same fraction of the amount sent. Hence, we conclude that groups are less trusting than individuals, but just as trustworthy.

What motivates individual self-sacrificial behavior in intergroup conflicts? Is it the altruistic desire to help the ingroup or the aggressive drive to hurt the outgroup? This paper introduces a new game paradigm, the Intergroup Prisoner’s Dilemma – Maximizing Difference (IPD-MD) game, designed specifically to distinguish between these two motives. The game involves two groups. Each group member is given a monetary endowment and can decide how much of it to contribute. Contribution can be made to either of two pools, one which benefits the ingroup at a personal cost, and another which, in addition, harms the outgroup. An experiment demonstrated that contributions in the IPD-MD game are made almost exclusively to the cooperative within-group pool. Moreover, pre-play intragroup communication increases intragroup cooperation but not intergroup competition. These results are compared with those observed in the Intergroup Prisoner's Dilemma (IPD) game, where group members' contributions are restricted to the competitive between-group pool.

Although reciprocity is a key concept in the social sciences, it is still unclear why people engage in costly reciprocation. In this study, physiological and self-report measures were employed to investigate the role of emotions, using the Power-to-Take Game. In this two-person game, player 1 can claim any part of player 2’s resources, and player 2 can react by destroying some (or all) of these resources thus preventing their transfer to player 1. Both physiological and self-report measures were related to destruction decisions. The observed pattern of emotional arousal and its correlation with self-reported anger provides support for using both techniques to study reciprocity.