paying or paying for it?

8/13/2019 Paying or Paying for It?

1/25

Paying, or Paying for It?Sean McCoy, Alexander Egan, Jonathan Maesato, and Richard Winkeller*

December 19, 2013

AbstractWe investigate the forces driving takers actions in a modified power-to-

take game in which takers must explain their actions or pay to avoid doing so.Three groups of takers are tested against one group of receivers; we vary both thetiming of informing takers that they will need to explain themselves and thetakers ability to pay to avoid an explanation. We find that takers willingness topay (WTP) to avoid explanation stays roughly the same whether they are toldthey can pay to avoid explaining themselves before or during the experiment. Weobserve that Big 5 personality traits affect each treatment differently withrespect to WTP, take rate, happiness, and the qualities of the messages sent.Specifically, takers who are told mid-experiment that they have to explain

themselves report a higher level of neuroticism than those told prior. Allparticipants reported feeling less extraverted after the experiment; this waslargely brought about by changes in neuroticism and agreeableness during theexperiment. WTP did not change over different income ranges, but happinesshad a large, positive effect on WTP. For takers whose messages include the wordsorry, WTP falls and take rate and length rise, all by a large margin. Whenfairness appears, WTP, take rate, and happiness fall while length rises to asimilarly large extent. We assert that these findings extensively influence socialbehavior: Consideration of future explanations, or avoidance of such scenarios,appears to have a significant monetary value to takers in the present that can beexploited in politics or simply in everyday interactions with ones own family andneighbors.

*All are undergraduates at Vassar College, Poughkeepsie, NY. Email at: [email protected],[email protected], [email protected], and [email protected], respectively.


2/25

1 IntroductionPeople often behave in ways that, at first, do not seem rational. In reality,

we make decisions contrary to the laws of economics, and we often attribute

these deviations to emotion. For example, knowing that your actions may

directly affect someone else may influence your behavior, and knowing that you

may have to explain your actions in the future may cause you to change your

behavior in the present. With these ideas in mind, people act differently in

different situations, causing their behavior to seem irrational at times. How can

we reconcile seemingly irrational behavior with seemingly rational thought

processes? Where exactly do these irrationalities lie, and are they irrationalities

at all?

Imagine that you have done something bad that will negatively impact

your spouse. This is not a good situation. You want to minimize the damage

done while keeping yourself reasonably happy. How should you respond? A

simple apology might not suffice. Often, people in this situation will turn to

buying something, paying in some form, to make up for their behavior. So, how

does dinner sound?

In this paper, we explore the behavior of takers in a power-to-take game.

Others (Grosskopf and Lpez-Vargas, 2013) have researched receivers in a similar

scenario. However, we do not study takers simply to complement their findings.

Takers, unlike receivers, are inherently selfish. People often think to act to serve

their own self-interest before considering how their actions will affect others.


3/25

Would buying dinner make you feel better about telling your spouse bad news?

Probably. Did you think about how your spouse would feel at dinner? Probably

not yet, but you might argue that you will worry about that soon enough. Either

way, others feelings initially take a back seat so far as many people are

concerned; in a way, we are takers before we are anything else. Thus, we attempt

to determine whether takers are willing to pay to avoid explaining their actions,

and, if so, we consider the factors that influence their decision-making. In

addition, we study the messages they send and look for relationships between

their words and their actions. In particular, we are interested in take rate, WTP

to avoid explaining ones actions, explanations of actions, and changes in

happiness.

2 Literature Review We draw our inspiration primarily from two papers. The first (Bosman

and van Winden, 2002), investigates responses to emotion in a classical power-to-

take game. The study focuses on the ability of emotions to generate behavior.

Prior to the game, the subjects perform an effortful task to earn money. After

this, in the first stage of the game, the taker elects to take a percentage of the

responders income. In the second phase, the responder decides on some amount

of the their total income to destroy. Thus, while the take rate remains the same,

the actual amount the taker receives is decreased at the cost of the responder

having a portion of his or her own income destroyed as well.


4/25

Using the results of the destruction rates as revealed preferences and self-

reported emotional states, they find that allowing the responder to self-select a

destruction rate, rather than having a choice between no money or all the money,

gives a more precise measure of emotional response than a dictator game. In

addition, the experiment requires that both players perform an effortful task to

earn income and avoid problems caused by the endowment effect.

The authors discuss the concept of emotional hazard, when a person

retaliates against an action done to him or her. In their experiment, the

emotional hazard is measured by the destruction rate, as it is an emotional

response to money being taken from the responder. Our experiment embraces the

concept of emotional hazard with the recognition that there can be more to the

cost of causing emotional hazard than having money destroyed. There are non-

monetary factors in emotional hazard, and we try to provoke these by having

takers explain their behavior in our experiment. We predict that takers will pay

to avoid explaining themselves to receivers, as they may view the non-monetary

emotional hazard of the other players judgment as a heavy cost that they wish

to avoid.

Even more important to our study was the work of Grosskopf and Lpez-

Vargas, who explore the often-overlooked topic of emotional expression and the

value of ex-post verbal communication in a power-to-take game. The authors use

a game in which one party (T) can take resources from the other party (P).

Players receive a $3 endowment for their participation. They then perform

effortful tasks that garner them additional income; these tasks are calibrated so


5/25

that the average profit is around $10.35, totaling $13.35. Next, a T player decides

what percentages of a given P players income (what part of the $10.35) to take.

Then, player P is told about Ts decision and asked to report the maximum

amount he would be willing to pay to send a message to T. After stating this

value, an actual price is randomly drawn from a uniform distribution from $0

to $3. If Ps WTP exceeds the actual price, the message is sent for the

aforementioned cost; if not, it is not sent and there is no cost to P. The $3

endowment guarantees that all P players are able to respond to T players if they

so desire. The message sent falls into one of four categories: OFU (Only for You;

messages sent directly to T player for a cost), SLTM (Somebody Listen to Me;

messages sent to T player through neutral third party for a cost), FM (Free

Message; messages sent to T at no cost), and NM (No Message; no message sent).

Note that T players are informed of their partners type before they decide what

percentage of their partners income to take.

Their main findings were that expressions of this sort have material value,

that more drastic changes in mood result in a greater value placed on expression,

and that the anticipation of expression induces less selfish behavior. There was a

considerable difference between take rates in the NM and FM trials: On average,

the T player took 68% of the P players income when they knew no message

could be sent and only 48% when they knew a free message could be sent.


6/25

3 Experiment This study has three main goals: First, we determine whether people will

pay to avoid explaining their actions. Second, we investigate the factors that

drive their behavior. Third, we analyze the messages they send in hopes of

understanding why they behave in the ways that they do and whether their

messages offer any valuable information about the senders.

3 1 Experimental DesignWe test our hypotheses, detailed below, in a modified power-to-take game

in which both takers and receivers complete an effortful task for which they are

then rewarded. Takers are then able to take any amount of the receivers

earnings. The receivers cannot respond; they must accept the division of earnings

as divided by the takers. Takers must then explain their actions unless,

depending on the trial, they have the option to pay to avoid doing so. We

conduct our experiment in four treatments, labeled trial 1-4 respectively. The

first involves takers who know beforehand that they will have to explain

themselves later but cannot pay to get out of doing so, whereas takers in the

second trial know beforehand that they can pay to avoid explaining themselves

later on. The third trial does not know that they will have to explain themselves

until they reach that part of the experiment, but they also learn at that point

that they can pay to avoid an explanation. The fourth trial is one of receivers

only; we want to concentrate on the takers in the experiment, and since the


7/25

receivers in our design are only present for the sake of comparisonto see, for

example, how happiness, message qualities, and other factors change with respect

to the amount takenwe feel that playing receivers against aggregate data is

acceptable. By conducting matters in this way, we gather far more data than

were we to run a standard one-taker-versus-one-receiver experiment.

The power-to-take game part of the experiment is preceded and followed

by a survey. The first gathers basic demographic information, a starting level of

happiness, data on Big 5 personality traits, and contains simple filter questions

that double as the effortful task. Participants all answer the same survey and are

all paid for getting through this part of the experiment. The aforementioned

power-to-take game follows; each treatment receives a slightly different set of

instructions pertaining to their treatments specific limitations (can pay, cannot

pay, uninformed, receivers). The follow-up survey is similar for all participants.

Big 5 personality trait and happiness data is collected again, along with a handful

of questions specific to the participants trials. In general, this data was poorly

collectedoften in hypothetical questionsso it goes largely unused in our

analyses. The full surveys are available in the Appendix of this paper.

3 2 HypothesesWe have five hypotheses to explain how takers will respond. First, we

believe that takers are willing to pay to avoid explaining their actions. The guilt

that they incur from having to explain their selfish actions is burdensome enough

that they will want to avoid explaining it.


8/25

Second, we believe that takers act less selfishly when they know ahead of

time that they must explain themselves later. These two hypotheses are tested by

regressing WTP, take rate, and other variables on message length and comparing

results by trial.

Third, we believe that takers WTP is higher when the take rate is higher.

We suspect that, as people take more, they will be willing to pay more to assuage

their guilt. We measure this by comparing WTP and take rate regressions

between trials.

Fourth, we believe that explanations will vary with take rate. More

specifically, as takers take more, we expect their messages to be longer and more

apologetic. We measure this through regressions of several variables on message

length and content, again sorting responses by trial.

Fifth, we believe that takers explanations of their actions will vary over

time. This relates to the hot and cold states of expression that occur during and

after the experiment. In short, we expect that explanations given in the exit

questionnaire will not match mid-game explanations. Since messages are

extremely difficult to quantify, we have not yet fully supported or rejected this

hypothesis, but we have regressed data of respondents whose messages contained

certain words against that of those who did not. Though this is not the most

complete analysis, we demonstrate the presence of strong effects of message

quality on actions in the game through regression.


9/25

3 3 LogisticsWe ran our experiment online using MTurk and SurveyMonkey in an

effort to maintain anonymous conditions, speed up the process of paying

participant, and minimize time spent sorting and collecting data. Our survey was

available worldwide to all MTurk users with a HIT approval rate of over 80%.

Further restrictions could have been used, but we argue that, as our experiment

deals with social interactions, severely limiting the number of people able to

respond was not in our best interests. Participants were paid $0.10 for completing

the HIT and another $0.10 for completing the survey. Takers could earn an

additional $0.10 by taking receivers money; receivers could gain only the $0.10

from the effortful task section less whatever takers took from them. Trial 1 had

104 participants, trial 2 95, trial 3 96, and trial 4 83. Of the 83 receivers, roughly

an eleventh played in a scenario against each possible amount taken ($0.00,

$0.01, $0.10). Data was collected on October 28 and 29, 2013. Surveys ran

until roughly 100-120 participants had completed each trial. Data was then

sorted. Data of participants who completed the surveys in less than 120 seconds

was ignored; a majority of these finished in under 30 seconds, and compared to

the 180 seconds it took us, the experimenters, to answer the survey, we conclude

that these data were likely not thoughtfully reported. Participants were paid with

respect to their responses on October 30 and 31. In total, we gathered

approximately 500 responses of which 378 were analyzed. Nearly two thirds of

responses were from America, one third from India, and 4% from other nations in

Europe, North and South America, and the Middle East.


10/25

4. Results

To test our first hypothesis, that takers are, in fact, willing to pay to

avoid explaining themselves, a t-test in Stata suffices: (Note that we explore this

in more detail later on.)

Table 1. T-test of WTP Versus 0.

For any reasonable p-value, we can safely say that takers are willing to pay to

avoid explaining themselves. One possible explanation for this is that there is a

cost involved in physically typing out message or in thinking of a message to type

out. However, participants in our study were MTurk users, individuals who

receive micropayments for doing similar tasks. So, we contend that inherent costs

are minimal and that the act of explaining their behavior was the costly part.

As for the second hypothesis, that takers change their behavior when they

know they must explain themselves beforehand, we call a regression table (note

that maleDummy is a binary sex variable, open1 etc. are measures of Big5

personality traits, take1 is take rate, and Informed etc. are the different trials):


11/25

Table 2. OLS Regression of Sex, Personality, and Trial on WTP and Take Rate

Note that in the leftmost column, Informed is not significant in predicting

take1, the take rate from the first (incentivized) game. Thus, the statement

Takers take the same amount regardless of their knowledge (or lack thereof) of

the fact that they will be required to explain themselves cannot be statistically

disproven. However, stopping at this simple hypothesis test would be insufficient.

We are also curious if any factors are significant in predicting take rate under our

different treatments. For this, we provide a second regression table:


12/25

Table 3. OLS Regression on Take Rate by Trial

Here we find a few interesting trends. First, an increase in age elicits a

decrease in take rate. This is logical given that older people are generally

wealthier than those who are younger; additionally, they are likely more aware of

the wellbeing of others and therefore act less selfishly. This effect is strongest in


13/25

the first trial, suggesting that people who are aware of their future act more

decisively than those who are not. The nationbinary variable (1 if American

respondent, 0 if not) positively affects take rate in the two trials in which the

takers have the option to avoid explaining themselves for a cost. Americans in

trial 3 were particularly selfish, a trend that reappears several times in our

analysis. We attribute the effects of employment to the knowing where you

stand mentality; those who are employed are less willing to take less since they

have a source of income and therefore can afford to let others keep their earnings

and want to do so to avoid retribution. Happiness increases take rate since trial 1

takers know that they have to explain themselves later and thus see no reason

not to take more since they cannot avoid those future explanations. Additionally,

more agreeable takers were inclined to take less, perhaps suggesting that people

have a predisposition to behave in line with their self-reported personalities (also,

agreeable people might simply be less selfish than others). Finally, we note that

WTP affects trial 3 more than trial 2, indicating that those who were previously

uninformed about the explanation took more whereas those who knew about the

explanation acted more conservatively. This finding supports our third

hypothesis.

Next we look more carefully at WTP to avoid explanations:


14/25

Table 4. OLS Regression on WTP by Trial.

Again we note that Americans were more selfish than international

respondents. Educations high significance implies those who were more educated

took less in scenarios where they understand their future options; perhaps these

people behave in a more sophisticated manner than the more nave trial 3 takers.

Employment behaves similarly: trial 2 takers understand the future and can

therefore assess their status in the present to make a split-second decision in the


15/25

present about how to behave to benefit them most in the future. Incomebrackets

negative effect on WTP suggests that the rich are greedier, and happinesss effect

reflects that those who are informed are in a content enough state that they can

pay a bit extra to avoid unnecessary guilt in the future. Finally, we again note

that take rate and WTP are interrelated.

Next we look at changes in happiness (dhappy = happiness at end of

experiment happiness at its start):

Table 5. OLS Regression of Happiness by Trial


16/25

We note that men in trial 3 (and also trial 2) were happier than women.

Partnered with the greedy American effect, this finding would indicate that

American men may get more pleasure out of greed than those in other nations

were it not for the overpower nationbinary finding that works in the opposite

direction; this suggests that Americans were less happy in all trials as a result of

their actions and makes the sex finding inconclusive. Those who were originally

more conscientious reported a large increase in happiness by the experiments

end, likely as a result of not feeling guilt or punishment for their actions. Most

importantly, we find that takers are greatly less happy at the end of the

experiment as a result of losing money. This is consistent with prospect theory

and general punishment aversion mechanisms.

We now explore more specifics of the messages sent:

Table 6. OLS Regression on Length by Trial


17/25

We observe that older participants generally wrote shorter messages than

their younger counterparts, perhaps out of impatience. The particularly high

nationbinary numbers are telling: American receivers wrote 20 characters less

than internationals, while takers in trials 2 and 3 split the difference, writing 20

fewer characters when they knew their future and 20 more when they did not.

Happier receivers wrote more for aforementioned reasons, but happier takers

tended to write less, again most likely relating to their belief that they know

what will happen in the future, and a simple message will not change that fact.

Those reporting high levels of openness wrote more, as did extraverted trial 3

takers. This finding is striking as all the other trials, even receivers, reported

drops in message length with extraversion; it is probably best attributed to a

punishment avoidance mechanism triggered by the trials specific surprise

explanation conditions. People also wrote their messages after reporting initial

levels of extraversion, so it is possible that those who thought themselves to be

extraverts decided to prove it by writing longer messages. Amounttaken and

education also had weaker, but still generally positive, effects on message length

for obvious reasons.

Lastly, we look at datawith respect to messages involving the words

sorry and fair; we find that those who say sorry have decidedly lower WTPs,

higher take rates, similar levels of happiness, and longer messages than those who

Reported in Appendix as data is clunky since we could not find a neat way to output it.


18/25

do not. Those who discuss fairness have much lower WTPs, lower take rates,

lower happiness, and longer messages, lending support to our fourth hypothesis.

5 DiscussionFrom this data, we have come to the following conclusions. First, we

confirm the findings in the Grosskopf paper for takers instead of receivers.

Therefore, evidence now exists supporting the notion that people on both sides of

the power-to-take game are willing to pay to send messages, and accordingly,

these messages inherently hold monetary value. The fact that our data, which

was gathered on MTurk, a community of people looking to make money, shows

this trend suggests that the magnitude of this trend in real life may be even

larger since people are not always interested in profit maximization when dealing

with people that they know personally, as opposed to people many miles away.

Second, we demonstrate that profit maximization is not the only factor

people consider when making decisions similar to those we pose in our game; this

is a relatively novel accomplishment as little on this topic exists in the realm of

power-to-take games. Punishment aversion seems a more likely mechanism across

all trials since takers take and pay in ways that lessen the retribution they might

expect from receivers. However, guilt likely plays a role as well since WTP

increased in trial 3 compared to trial 2, demonstrating that, once informed,

people are willing to pay more to remedy their selfish behavior. Backwards

Note that our fifth hypothesis is still unconfirmed. These data seem to support it, but furtheranalysis is required to make conclusions about it.


19/25

induction factors in as well; trial 1 participants displayed a smaller change in

happiness than those in other trials likely because they knew beforehand that

they would have to explain themselves later; this explanation could not be

avoided, and thus they accepted it as an event that must occur whether they

want it to or not. On the other hand, participants in trials 2 and 3 had the

option of paying to avoid explaining themselves. This caused a smaller change in

happiness, large increases in neuroticism levels, and large decreases in

extraversion levels.

Third, people with different personalities behave differently and,

specifically, send messages differently. Extraverts and highly open people send

longer messages, and grateful receivers send longer messages as well. Takers who

learn that they have to explain themselves send longer messages than those who

knew they would have to explain themselves ahead of time. Those who mention

the words sorry and fair behave drastically differently in the game from

those who do not; perhaps they feel that key words carry more value than more

conservative players and may therefore be more (or less) selfish. There is much

more analysis to be done on messages of this sort, an endeavor we may undertake

in a forthcoming paper or perhaps one that will be taken up by other researchers.

On a social level, people do not behave as if in emotional hot and cold

states. They process data very quickly and make assumptions about the future

almost instantly; trial 2 participants did not differ that much from those in trial

3, especially given that trial 3 players were uninformed for the first half of the


20/25

experiment. Behavior does not change as much with respect to when information

is learned but rather with respect to what sort of information is learned.

Additionally, guilting people into thinking about their actions cannot

enforce pro-social behavior; instead, threats that induce a punishment aversion

mechanism may be more successful. It is not yet clear what this says for politics

or keeping up with the Joneses on a larger scale, but our data suggests that is it

fear of having to explain why something is not a certain way that prompts us to

preemptively change our behavior to avoid these sort of explanations.

Looking forwards, we plan to re-run our experiment under slightly

different parameters to collect more compelling data. We will conduct a deeper

analysis of messages sent, and questions will be posed in a slightly different way

to MTurk participants, who will be selected more carefully. Ideally, an expansion

on this study would investigate the changes between messages sent at different

times (i.e., Does your story today differ from your story tomorrow?) to see if

people are time-inconsistent when it comes to explaining their actions. It is

entirely possible that explanations change on a sort of sliding, prospect-theory-

induced scale that produces a different, but always fitting, explanation given the

circumstances of the situation (i.e., Will you tell your spouse and your parents

the same story today? How about tomorrow? Will the stories converge from two

different starting points to a singular, end state story that is remembered and

retold in the future as the single story of past events?) There is much work to

be done, but for now, the question of Paying, or Paying for It? seems to be

best answered by Paying!


21/25

6 ConclusionIn opposition to the standard belief that communication mainly has an

indirect cost and benefit to interactions, our experiment focuses on the direct cost

and benefit of communication itself. We find that the takers willingness to pay

to avoid an explanation in a power-to-take game stays similar regardless of

whether or not they are told that they can pay to avoid an explanation prior to

the experiment. We find that apologetic takers had a much lower willingness to

pay and sent longer messages, implying that both greed and guilt are important

mechanisms to consider. Finally, experiment subjects who had messages

regarding fairness and equality were more willing to explain their actions and,

unsurprisingly, had a lower take rate. These results suggest that the act of

explaining oneself, even to a complete stranger, has real costs. We care about

what others think of us, so guilt and punishment aversion factor into our

decision-making processes. However, because guilt is not particularly effective at

preventing people from being selfish, punishment mechanisms are a more effective

method of encouraging pro-social behavior.

References1. Bosman, Ronald, and Frans van Winden. 2002. Emotional Hazard in a

Power-To-Take Experiment. Economic Journal, 112 (476): 147-169.

2. Grosskopf, Brit and Kristian Lpez-Vargas. Forthcoming. The Demand forExpressing (Emotions).


22/25

AppendixSorry data:

Table 7. WTP by Sorry and Take Rate by Sorry


23/25

Table 8. Happiness by Sorry and Message Length by Sorry


24/25

Fair data:

Table 9. WTP by Fair and Take Rate by Fair


25/25

Table 10. Happiness by Fair and Message Length by Fair.

Surveys can be found at the links below. Note that you have to fill in answers forall questions to progress through the different pages of the survey. Responses donot matter; feel free to fill them in randomly:Trial 1: http://goo.gl/NhUKNBTrial 2: http://goo.gl/lqsxZXTrial 3: http://goo.gl/RIeux6Trial 4: http://goo.gl/i51KtpThe page displayed on MTurk can be found here: http://goo.gl/btBk5zMore information is available upon request. Please contact the authors.

This survey was given to the $0.05 sub-group of the receivers. All other Trial 4 surveys wereexactly the same except for the $0.05 (or another amount) has been taken from you line.

paying or paying for it?

Documents