The effect of common knowledge – Why do people cooperate more when they face a social dilemma situation where mutual cooperation yields restoration of fairness? Nobuyuki Takahashi (Hokkaido University) Ryoichi Onoda (Hokkaido University) Hikaru Hamada (Hokkaido University) Rie Mashima (Kumamoto Gakuen University) ICSD2009 Kyoto

2 Introduction There have been many collective behaviors in human history. Collective behaviors seem to be thrived when the purpose is the restoration of fairness (e.g., civil rights movements, anti-Vietnam War movements). Why? Many collective behaviors involve social dilemmas. So, isn’t free-riding still the better option than participating in a social movement?

3 Takezawa (1999) Ordinary one-shot PGG 3) Expectation of others’ cooperation in one-shot public goods game (PGG) Provision of PG restores fairness < Since expectation of others’ cooperation promotes cooperation, 4) Cooperation rate Ordinary one-shot PGG Provision of PG restores fairness < 1) Experience of unfairness invokes the sense that unfairness is shared among the other people. 2) The goal changes from pursuing self-interest to jointly restoring fairness. Why does the experience of unfairness promote expectation of others’ cooperation?

4 Takezawa (1999) The sense of fairness activates the common knowledge that everybody was treated unfairly. This common knowledge induces higher level of expectation that leads to higher level of cooperation. Why does this process occur? Why is the expectation of others’ cooperation higher when participants were all treated unfairly? Taken for granted, but… According to Takezawa (1999)…

5 What affects expectation? Two reasons to defect in SD (e.g., Dawes et al. 1986; Van Lange et al. 1992; Yamagishi & Sato 1986) (1) Greed – the temptation to free-ride Not greed but fear affects expectation of others’ cooperation. (2) Fear – the prospect that one's cooperation may be exploited However, there can be at least two sources of fear. Fear of greed Fear of fear What is the function of being treated unfairly?

6 Revisiting Takezawa (1999) Two possibilities What is the function of being treated unfairly? (1) Reduction of fear of greed – People expect that the experience of unfairness transforms the goal of other people from maximizing self-interest to achieving mutual cooperation in order to restore fairness. In order for the expectation of others’ cooperation to increase, in addition to reduction of fear of greed of the other players, reduction of fear of fear may be necessary. The other people will cooperate because they are no longer greedy. We want to restore fairness!

7 Revisiting Takezawa (1999) Two possibilities What is the function of being treated unfairly? In order for the expectation of others’ cooperation to increase, in addition to reduction of fear of greed of the other players, reduction of fear of fear may be necessary. We want to restore fairness! However, this may not be sufficient to induce cooperation. But the other people may still defect because of fear. Fear of fear (1) Reduction of fear of greed – People expect that the experience of unfairness transforms the goal of other people from maximizing self-interest to achieving mutual cooperation in order to restore fairness.

8 Revisiting Takezawa (1999) (2) Reduction of fear of fear – Perception of unfairness makes people expect that the other people’s fear of greed was reduced. common knowledge Reducing fear of fear requires that the fact that everyone was treated unfairly is a common knowledge. The other people will cooperate because they have no fear. The others are no longer greedy!

9 Main purpose of the study To differentiate these two functions and see if reduction of fear of fear is necessary for inducing higher level of cooperation Manipulation: Whether or not the fact that everybody was treated unfairly is a common knowledge Reduction of fear of greed: Privately knowing that everybody was treated unfairly is enough Reduction of fear of fear: The fact that everybody was treated unfairly must be a common knowledge

10 Experiment 3) Private knowledge condition : The same as Common knowledge condition. The only difference is that only the participants knew that everybody was treated unfairly by a dictator, and that they could restore fairness by achieving mutual cooperation in PGG. One factor, between-subjects design 1) Control condition : Ordinary one-shot PGG without any context 2) Common knowledge condition : One-shot PGG that is identical with Control condition. However, before playing the game, participants were all treated unfairly by a dictator and they could restore fairness by achieving mutual cooperation in PGG. Participants : 125 undergraduate students (M: 68, F: 56, UK: 1)

11 1) Control condition 1 st stage: Social inference task (a bogus task)  Each player was paid 500 yen ($5) for completing the task. Ordinary one-shot PGG without any context Social inference task 500 yen

12 1) Control condition 2 nd stage: One-shot step-level PGG Ordinary one-shot PGG without any context Cooperation : Provide 500 yen to the group Defection : Keep 500 yen for oneself 500 yen If more than 3 players cooperate,

13 1) Control condition Ordinary one-shot PGG without any context 500 yen If more than 3 players cooperate, a public good (4000 yen) is provided yen 2 nd stage: One-shot step-level PGG Cooperation : Provide 500 yen to the group Defection : Keep 500 yen for oneself

14 1) Control condition Ordinary one-shot PGG without any context 500 yen Total earnings of cooperators : (4000/5)=800 yen defectors : (4000/5)=1300 yen 4000 yen C C C C D 800 yen 2 nd stage: One-shot step-level PGG Cooperation : Provide 500 yen to the group Defection : Keep 500 yen for oneself

15 1) Control condition Ordinary one-shot PGG without any context 500 yen If less than 4 players cooperate, 2 nd stage: One-shot step-level PGG Cooperation : Provide 500 yen to the group Defection : Keep 500 yen for oneself

16 1) Control condition Ordinary one-shot PGG without any context 500 yen If less than 4 players cooperate, a public good is not provided. 0 yen 2 nd stage: One-shot step-level PGG Cooperation : Provide 500 yen to the group Defection : Keep 500 yen for oneself

17 1) Control condition Ordinary one-shot PGG without any context 500 yen If less than 4 players cooperate, a public good is not provided. 0 yen 2 nd stage: One-shot step-level PGG Cooperation : Provide 500 yen to the group Defection : Keep 500 yen for oneself Deception Although participants were told that there were other participants and that they would interact with them, actually each participant behaved as an individual. In other words, there was no real interaction among the participants.

18 2) Common knowledge condition 1 st stage: Social inference task (a bogus task)  As a 6-person group, players were paid 7000 yen ($70) for completing the task. Identical incentive structure with the one in the other 2 conditions Social inference task 7000 yen

19 2) Common knowledge condition After 1 st stage (before 2 nd stage): Dictator game  A dictator was chosen randomly from the group and decided to allocate 7000 yen among group members. Identical incentive structure with the one in the other 2 conditions 7000 yen ? yen Dictator Recipient Participant

20 2) Common knowledge condition After 1 st stage (before 2 nd stage): Dictator game  A dictator was chosen randomly from the group and decided to allocate 7000 yen among group members. Identical incentive structure with the one in the other 2 conditions 7000 yen ? yen Dictator Recipient Participant Since we used deception, however, actually a dictator and the other recipients did not exist. Only a participant was a real person. Also, dictator’s decision was predetermined by the experimenter.

21 2) Common knowledge condition After 1 st stage (before 2 nd stage): Dictator game  A dictator was chosen randomly from the group and decided to allocate 7000 yen among group members. Identical incentive structure with the one in the other 2 conditions 4500 yen 500 yen Dictator Recipient Participant The dictator allocated 4500 yen for himself and 500 yen for each of the other 5 players.

22 2) Common knowledge condition 2 nd stage: One-shot step-level PGG to restore fairness  5 recipients were asked if they want to provide 500 yen. Identical incentive structure with the one in the other 2 conditions 4500 yen 500 yen Dictator Cooperation : Provide 500 yen to the group Defection : Keep 500 yen for oneself

23 2) Common knowledge condition Identical incentive structure with the one in the other 2 conditions 4500 yen 500 yen Dictator C CCCD If more than 3 recipients cooperate, 2 nd stage: One-shot step-level PGG to restore fairness

24 2) Common knowledge condition Identical incentive structure with the one in the other 2 conditions 500 yen Dictator If more than 3 recipients cooperate, 4000 yen was forfeited from the dictator, 4000 yen C CCCD 2 nd stage: One-shot step-level PGG to restore fairness

25 2) Common knowledge condition Identical incentive structure with the one in the other 2 conditions 500 yen 4000 yen 500 yen Dictator If more than 3 recipients cooperate, 4000 yen was forfeited from the dictator, and recipients share 4000 yen equally. 2 nd stage: One-shot step-level PGG to restore fairness

26 2) Common knowledge condition Identical incentive structure with the one in the other 2 conditions 500 yen Dictator If more than 3 recipients cooperate, 4000 yen was forfeited from the dictator, and recipients share 4000 yen equally. 800 yen Total earnings of cooperators : (4000/5)=800 yen defectors : (4000/5)=1300 yen CCCCD 2 nd stage: One-shot step-level PGG to restore fairness

27 2) Common knowledge condition Identical incentive structure with the one in the other 2 conditions 4500 yen 500 yen Dictator If less than 4 recipients cooperate, nothing happens. DDCCD Total earnings of cooperators : =0 yen defectors : 500-0=500 yen 2 nd stage: One-shot step-level PGG to restore fairness

28 3) Private knowledge condition Identical with Common knowledge condition The only difference is that participants are the only one who knew that everybody was treated unfairly. After the dictator allocated 7000 yen, each player received an allocation sheet that only says how much she was allocated by the dictator. ? yen 500 yen ? yen Dictator Recipient

29 3) Private knowledge condition ? yen 500 yen ? yen Dictator Recipient By lottery one player was chosen as a person who could see the complete distribution of 7000 yen. Identical with Common knowledge condition The only difference is that participants are the only one who knew that everybody was treated unfairly. After the dictator allocated 7000 yen, each player received an allocation sheet that only says how much she was allocated by the dictator.

30 Identical with Common knowledge condition The only difference is that participants are the only one who knew that everybody was treated unfairly. After the dictator allocated 7000 yen, each player received an allocation sheet that only says how much she was allocated by the dictator. 3) Private knowledge condition 4500 yen 500 yen Dictator Recipient By lottery one player was chosen as a person who could see the complete distribution of 7000 yen. The recipient who was chosen by lottery knew that the other recipients did not have full information. She knew that she was the only person who knew how much each person received from the dictator.

31 Identical with Common knowledge condition The only difference is that participants are the only one who knew that everybody was treated unfairly. After the dictator allocated 7000 yen, each player received an allocation sheet that only says how much she was allocated by the dictator. 3) Private knowledge condition 4500 yen 500 yen Dictator Recipient By lottery one player was chosen as a person who could see the complete distribution of 7000 yen. The recipient who was chosen by lottery knew that the other recipients did not have full information. She knew that she was the only person who knew how much each person received from the dictator. Since we used deception, actually all participants were chosen by lottery. Participant

32 Hypotheses H1: Only reduction of fear of greed occurs Participants would cooperate more in both Private and Common knowledge conditions than in Control condition. There are 3 competing hypotheses regarding cooperation rate. Hypothetical result Cooperation rate Control Private Common Privately knowing that everybody was treated unfairly is enough, and common knowledge is unnecessary

33 Hypotheses H2: Only reduction of fear of fear occurs Participants would cooperate more in Common knowledge condition than in Control and Private knowledge conditions. There are 3 competing hypotheses regarding cooperation rate. Hypothetical result Control Private Common Cooperation rate Privately knowing that everybody was treated unfairly is not enough, and common knowledge is necessary

34 Hypotheses H3: Both reduction of fear of greed and reduction of fear of fear occur. Cooperation rate would be lowest in Control condition and highest in Common knowledge condition. There are 3 competing hypotheses regarding cooperation rate. Hypothetical result Control Private Common Cooperation rate Both privately knowing that everybody was treated unfairly and common knowledge promote cooperation.

35 Result (1) Cooperation rate Figure 1: Cooperation rate in each condition Dummy for Private knowledge condition: β = -0.11, n.s. Dummy for Common knowledge condition: β = 0.98, p<.05 Participants cooperated more in Common knowledge condition than in the other two conditions. Hypothesis 2 was supported. Control Private Common Logistic regression DV: Cooperation=1, Defection =0 IV: Dummy for Private knowledge cond, Dummy for Common knowledge cond *Reference category – Control condition

36 Result (2) Effect of expectation The effect of common knowledge disappeared when we controlled expectation. Independent variableModel 1Model 2Model 3 Dummy for Private knowledge Dummy for Common knowledge 0.98* Expected cooperation rate **- Estimated probability of the provision of a public good * Participants cooperated more in Common knowledge condition because they expected more cooperation by the others. This result suggests that reduction of fear promoted cooperation

37 Participants cooperated more in Common knowledge condition than in the other conditions. Summary and Conclusion Participants cooperated more only when they knew that the other participants knew that everybody was treated unfairly. Summary Unfair treatment must be a common knowledge in order to induce a higher level of cooperation. This is because such a common knowledge reduces fear of fear rather than fear of greed. Conclusion

38 Future directions Are there any factors other than the sense of unfairness that promote cooperation by reducing fear of fear through automatically activating the perception of common knowledge?

39 Thank you for your attention.

40 Hypotheses (1) Participants would cooperate more in the unfair treatment conditions (private and common knowledge conditions) than in the control condition. Cooperation rate The effect of unfair treatment by the dictator (2) Participants would cooperate more in the common knowledge condition than in the private knowledge condition. The effect of common knowledge Private knowledge condition Common knowledge condition > Control condition Private knowledge condition Common knowledge condition >

41 Result (1) Cooperation rate Figure 1: Cooperation rate in each condition Dummy for Private knowledge condition: β = -1.09, p<.05 Dummy for Control condition: β = 0.98, p<.05 Participants cooperated more in Common knowledge condition than in the other two conditions. Hypothesis 2 was supported. Logistic regression Dependent variable: Cooperation=0, Defection =1 Independent variable: Dummy for Private knowledge condition Dummy for Control condition Common knowledge condition – Reference category

42 Experiment  5 players per group  Players first engaged in a social inference task (bogus task), and were paid 500 yen ($5) for completing the task.  Players were then asked if they want to provide 500 yen to the group.  If more than 3 players provided 500 yen to the group, everybody received 800 yen as a bonus. Cooperators receive 800 yen and defectors receive 1300 yen.  If less then 4 players provided 500 yen, then nobody received a bonus. Cooperators receive 0 yen and defectors receive 500 yen. Control condition : Ordinary one-shot SD without any context We used deception: Although participants were told that there were other participants and that they would interact with them, actually each participant behaves as an individual. In other words, there was no real interaction with the other participants.

43 Experiment  2 nd stage: One-shot step level SD Control condition : Ordinary one-shot SD without any context Cooperation : Provide 500 yen to the group Defection : Keep 500 yen for oneself 500 yen If more than 3 players cooperate, a public good (4000 yen) is provided. Total earnings of cooperators : (4000/5)=800 yen defectors : (4000/5)=1300 yen If less then 4 players cooperate, a public good is not provided. Total earnings of cooperators : =0 yen defectors : 500-0=500 yen

44 Experiment  6 players per group  Players first engaged in a social inference task (bogus task), and were paid 7000 yen as a group.  A dictator was chosen randomly from the group and decided to allocate 7000 yen among group members.  The dictator allocated 4500 yen for himself and 500 yen for each of the other 5 players.  5 players were then asked if they want to provide 500 yen.  If more than 3 players provided 500 yen to the group, 4000 yen was forfeited from the dictator and the other 5 players shared 4000 yen equally. In other words, each player received 800 yen.  If less then 4 players provided 500 yen, then nothing happens. Common knowledge condition Incentive structure is identical with the one in the other conditions. Successful restoration of fairness Unsuccessful restoration of fairness

45 Experiment  Identical with Common knowledge condition  The only difference is that participants are the only one who knew that everybody was treated unfairly by the dictator. Private knowledge condition Since we used deception, actually all participants were chosen by lottery. After the dictator allocated 7000 yen, each player received an allocation sheet that says how much she was allocated by the dictator. However, how much the other players’ received was not written on the allocation sheet. Then, by lottery one player was chosen as a person who could see the complete distribution of 7000 yen. Incentive structure is identical with the one in the other conditions.

46 Result (2) Effect of 2 nd -order expectation What is your estimate of the other participants’ estimate of the probability that more than 3 participants provided the money? F （ 2,124 ） =6.66, p<.01 2 nd -order expectation (expectation on expectation) was lower in Control condition than in the other 2 conditions.

47 Result (2) Effect of 2 nd -order expectation The effect of common knowledge disappeared when we controlled 2 nd -order expectation. Participants cooperated more in Common knowledge condition because they expected the other participants’ expectation of cooperation higher. Independent variableModel 1Model 2 Private knowledge-0.11 Common knowledge0.98* nd -order expectation-0.04 ** Reduction of fear of fear plays a critical role.

48 Result (2) Effect of expectation What is your estimation of the probability that more than 3 participants provided the money? How many participants do you think have provided the money? F （ 2,124 ） =5.11, p<.01F （ 2,123 ） =3.43, p<.05 Participants’ expectation was higher in Common knowledge condition than in Control condition.

49 Participants cooperated more in Common knowledge condition than in the other conditions. Discussion Participants cooperated more only when they knew that the other participants knew that everybody was treated unfairly. 2 nd -order expectation plays a critical role Being treated unfairly makes people believe that it is a common knowledge.