Social comparisons and reference group formation: Some experimental evidence

Ian M. McDonald, Nikos Nikiforakis, Nilss Olekalns, Hugh Sibly

Research output: Contribution to journalArticle

Abstract

We experimentally investigate reference group formation and the impact of social comparisons in a three-player ultimatum game. The players compete in a real-effort task for the role of the proposer. The role of the responder is randomly allocated to one of the other two participants. The third participant, the non-responder, receives a fixed payment - our treatment variable - and makes no decision. Knowing the size of this payment, the proposer makes a take-it-or-leave-offer to the responder. Most responders appear to ignore the non-responder when the payment the latter receives is low, but not when it is high. As a result, the existence of a non-responder and the payment they receive has a pronounced effect on bargaining outcomes and increases overall rejection rates. We present a simple model in which agents select the members of their reference group strategically to reduce the extent of cognitive dissonance they experience. The model produces results consistent with our experimental findings.

Original languageEnglish (US)
Pages (from-to)75-89
Number of pages15
JournalGames and Economic Behavior
Volume79
Issue number1
DOIs
StatePublished - May 1 2013

Fingerprint

Social comparison
Reference groups
Payment
Group formation
Ultimatum game
Cognitive dissonance

Keywords

  • Cognitive dissonance
  • Laboratory experiments
  • Real-effort
  • Social comparisons
  • Ultimatum bargaining

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Social comparisons and reference group formation : Some experimental evidence. / McDonald, Ian M.; Nikiforakis, Nikos; Olekalns, Nilss; Sibly, Hugh.

In: Games and Economic Behavior, Vol. 79, No. 1, 01.05.2013, p. 75-89.

Research output: Contribution to journalArticle

McDonald, Ian M. ; Nikiforakis, Nikos ; Olekalns, Nilss ; Sibly, Hugh. / Social comparisons and reference group formation : Some experimental evidence. In: Games and Economic Behavior. 2013 ; Vol. 79, No. 1. pp. 75-89.
@article{941b6877d26e45f5acce2709d314ea06,
title = "Social comparisons and reference group formation: Some experimental evidence",
abstract = "We experimentally investigate reference group formation and the impact of social comparisons in a three-player ultimatum game. The players compete in a real-effort task for the role of the proposer. The role of the responder is randomly allocated to one of the other two participants. The third participant, the non-responder, receives a fixed payment - our treatment variable - and makes no decision. Knowing the size of this payment, the proposer makes a take-it-or-leave-offer to the responder. Most responders appear to ignore the non-responder when the payment the latter receives is low, but not when it is high. As a result, the existence of a non-responder and the payment they receive has a pronounced effect on bargaining outcomes and increases overall rejection rates. We present a simple model in which agents select the members of their reference group strategically to reduce the extent of cognitive dissonance they experience. The model produces results consistent with our experimental findings.",
keywords = "Cognitive dissonance, Laboratory experiments, Real-effort, Social comparisons, Ultimatum bargaining",
author = "McDonald, {Ian M.} and Nikos Nikiforakis and Nilss Olekalns and Hugh Sibly",
year = "2013",
month = "5",
day = "1",
doi = "10.1016/j.geb.2012.12.003",
language = "English (US)",
volume = "79",
pages = "75--89",
journal = "Games and Economic Behavior",
issn = "0899-8256",
publisher = "Academic Press Inc.",
number = "1",

}

TY - JOUR

T1 - Social comparisons and reference group formation

T2 - Some experimental evidence

AU - McDonald, Ian M.

AU - Nikiforakis, Nikos

AU - Olekalns, Nilss

AU - Sibly, Hugh

PY - 2013/5/1

Y1 - 2013/5/1

N2 - We experimentally investigate reference group formation and the impact of social comparisons in a three-player ultimatum game. The players compete in a real-effort task for the role of the proposer. The role of the responder is randomly allocated to one of the other two participants. The third participant, the non-responder, receives a fixed payment - our treatment variable - and makes no decision. Knowing the size of this payment, the proposer makes a take-it-or-leave-offer to the responder. Most responders appear to ignore the non-responder when the payment the latter receives is low, but not when it is high. As a result, the existence of a non-responder and the payment they receive has a pronounced effect on bargaining outcomes and increases overall rejection rates. We present a simple model in which agents select the members of their reference group strategically to reduce the extent of cognitive dissonance they experience. The model produces results consistent with our experimental findings.

AB - We experimentally investigate reference group formation and the impact of social comparisons in a three-player ultimatum game. The players compete in a real-effort task for the role of the proposer. The role of the responder is randomly allocated to one of the other two participants. The third participant, the non-responder, receives a fixed payment - our treatment variable - and makes no decision. Knowing the size of this payment, the proposer makes a take-it-or-leave-offer to the responder. Most responders appear to ignore the non-responder when the payment the latter receives is low, but not when it is high. As a result, the existence of a non-responder and the payment they receive has a pronounced effect on bargaining outcomes and increases overall rejection rates. We present a simple model in which agents select the members of their reference group strategically to reduce the extent of cognitive dissonance they experience. The model produces results consistent with our experimental findings.

KW - Cognitive dissonance

KW - Laboratory experiments

KW - Real-effort

KW - Social comparisons

KW - Ultimatum bargaining

UR - http://www.scopus.com/inward/record.url?scp=84873548266&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84873548266&partnerID=8YFLogxK

U2 - 10.1016/j.geb.2012.12.003

DO - 10.1016/j.geb.2012.12.003

M3 - Article

VL - 79

SP - 75

EP - 89

JO - Games and Economic Behavior

JF - Games and Economic Behavior

SN - 0899-8256

IS - 1

ER -