Stephen Leider, Markus M. Möbius, Tanya Rosenblat, Quoc-Anh Do

DIRECTED ALTRUISM AND ENFORCED RECIPROCITY IN SOCIAL NETWORKS

The Quarterly Journal of Economics, November 2009

Lana Shifrina Groups in Economic Decision-Making Jingjing Zhang 14.05.12

The authors of the paper choose a real world social network (Facebook) to conduct a prosocial behavioral experiment. The motivation behind the experiment is to expand on the previous studies, examining peoplesʼ underlying altruism vs. granting favors in exchange for expected future returns. The authors observe that measuring underlying altruism empirically is quite difficult because people tend to socialize within their social circles and the decisions they make are based on feelings toward individuals within these circles and not on the true nature of the decision maker. In order to overcome these prejudices, the authors believe that this experiment was designed in such a way, that the personal favoritism can be removed and individualsʼ baseline altruism can then be measured. The real world application and the goal of the experiment is to help economists better explain disturbances within systems of informal insurance, provided by social networks, and to predict the necessary measures required to stabilize the system. The paper identifies three natures of prosocial giving: “(1) baseline altruism toward randomly selected strangers, (2) directed altruism that favors friends over random strangers, and (3) giving motivated by the prospect of future interaction.” (LEIDER) In order to test each underlying nature of prosocial giving, undergraduate students from Harvard university were chosen to participate in either modified dictator game or helping game. Depending on the results in the anonymous vs. nonanonymous and named vs. nameless treatment, the authors were able to draw conclusions on individualsʼ true