Abstract: We study the effect of promises on trust and costly punishment in a strategic setting, where participants play a three-stage investment game. We propose a novel behavioral mechanism, belief-dependent frustration and anger, which links communication, beliefs, and the willingness to forgo material payoffs to punish others. The theoretical model implies that anticipation of belief-dependent costly punishment leads to increased levels of efficiency and cooperation. Promises change beliefs, raise expectations about payoffs, and further enhance cooperation. Our experimental results are consistent with the theory that costly punishment results from belief-dependent anger and frustration. As hypothesized, promises are the main factor influencing beliefs, and broken promises lead to significantly higher levels of punishment.
WORK IN PROGRESS
"Threats," with Martin Dufwenberg and Alec Smith. (Job Market Paper)
Abstract: We examine experimentally the effect of threats on deterrence and threats’ credibility in strategic settings that allow for costly punishment. A belief-dependent frustration-anger model captures strategic behavior when explicit threats are available. In the model, communication changes beliefs and expectations about payoffs. Threats then serve as credible commitment devices, and lead to higher rates of costly punishment as well as higher rates of deterrence. In one treatment of our experiment, second-mover has the option to send 1-sided freeform messages to the first-mover. In addition, participants' beliefs both before and after communication are elicited. Our experimental results support the theory, and demonstrate that threats which influence reported beliefs are credible and serve as a successful mechanism for deterrence.
"Neuromodulation of Other-Regarding Preferences via HD-tDCS over the Right Temporoparietal Junction," with Sheryl Ball, Xiaomeng Zhang, and Alec Smith.
Abstract: The structure and function of the right temporoparietal junction (rTPJ) has been associated with social behavior, sensory integration, information processing, and attention allocation. We examine the effect of neuromodulation of rTPJ on other-regarding preferences and rational choice using focal high definition transcranial Direct Current Stimulation (HD-tDCS). The effects of stimulation on both other-regarding behavior and rationality (Monotonicity, WARP, and GARP) of individuals' choices are measured. We find that rTPJ not only plays a role in other-regarding behavior but also broadly affects the consistency and rationality of choices. The results suggest that comprehensive theories of rTPJ function in social behavior should account for the multifaceted role that rTPJ plays in processing sensory information.