1. Group Cooperation Under Uncertainty Min Gong Advisors: Jonathan Baron Howard Kunreuther

2. Outline Introduction and Motivation Major Finding on Group Cooperation Under Uncertainty  Study 1: Group-Individual Cooperation Difference in Deterministic and Stochastic PD Why do Groups Cooperate More than Individuals Under Uncertainty?  Study 2: Group-Individual Risk Preference Difference  Study 3: 3-Option Stochastic PD  Study 4: A Survey Study Generality Discussion and Future Research  When does uncertainty reduce inter-group competition and encourage inter-group cooperation?  Future research on group factors and game factors

3. Key Finding Groups are less cooperative than individuals in a prisoner’s dilemma, but more cooperative than individuals in a stochastic version of the game.

4. Motivation – Why Study Group Cooperation Under Uncertainty In many real-life situations, the decision makers are nations, firms, or families Groups behave differently from individuals with regard to  cooperation and competition (Insko et al. 1987; Bornstein et al., 2002 ; Wildschut 2003)  uncertainty (Marquis 1962; Sniezek 1992)

5. Outline Introduction and Motivation Major Finding on Group Cooperation Under Uncertainty  Study 1: Group-Individual Cooperation Difference in Deterministic and Stochastic PD Why do Groups Cooperate More than Individuals Under Uncertainty?  Study 2: Group-Individual Risk Preference Difference  Study 3: 3-Option Stochastic PD  Study 4: A Survey Study Generality Discussion and Future Research  When does uncertainty reduce inter-group competition and encourage inter-group cooperation?  Future research on group factors and game factor

6. Experiment Design--Subjects & Processes 2 Types of players  Individual OR group player  Group Player 3 members in each group A group makes one collective decision All members share the outcome equally Unanimous decisions or majority rule Subjects:  202 subjects  Between-subject 2X2 design (2 games X 2 player types)

7. Experiment Design – the Deterministic Prisoner’s Dilemma Negative numbers represent costs or losses The dominant strategy is Not Invest (always better off by defecting no matter what the other party does) Nash Equilibrium is (NI, NI) Player 2 InvestNot Invest Player 1 Invest-45;- 45-65;- 40 Not Invest -40;- 65-52;- 52 Table 1: the DPD game

8. Experiment Design – the Stochastic Prisoner’s Dilemma In the SPD, each player decides whether or not to invest at a cost of 45 to reduce his or her own risk of losing 100. If one player invests, both players’ risks are reduced. Joint cooperation eliminates uncertainty. Substituting the outcomes with the expected values  the DPD. Player 2 InvestNot Invest Player 1 Invest-45; -4520% lose 145, 80% lose 45; 40% lose 100, 60% lose 0 Not Invest 40% lose 100, 60% lose 0; 20% lose 145, 80% lose 45 52% lose 100, 48% lose 0; 52% lose 100, 48% lose 0 Player 2 InvestNot Invest Player 1 Invest-45;- 45-65;- 40 Not Invest -40;- 65-52;- 52 Table 1: the DPD gameTable 2: the SPD game

9. A Example of the SPD game SPD is a special case of the Interdependent Security Game (Kunreuther and Heal, 2003) A Scenario : Baggage transfer security Pre-911  An airline has to determine whether it wants to invest in baggage security  Investing reduces its risk to be attacked by terrorists  But even if it invests, it may face a security risk from a dangerous bag loaded onto its plane by another airline, as in the Pan Am 103 crash.

10. Key Finding Groups are less cooperative than individuals in the DPD, but more cooperative than individuals in the SPD.

11. What is Known and What is New Replicated the “discontinuity effect”: groups cooperate less than individuals in DPD ( Insko, et al 1987; Wildschut et al 2003 for a review ) Discovered a “reversed discontinuity effect”: groups cooperate more than individuals in SPD. Survey data and recorded discussion provide explanations for both the discontinuity effect in DPD and the reversed discontinuity effect in SPD.

12. Why Groups Cooperate Less than Individuals (Discontinuity Effect) in DPD Anonymity in a group shields social sanction from the other group Defection in the name of group interest Out-group schema on intergroup competition At least one member identifies the dominant strategy and persuades others Identifiability Explanation Social Support Explanation Schema-Based Distrust Explanation Smart-strategy persuasion Explanation Discontinuity Effect Greater greed Greater fear

13. Why Discontinuity Effect Disappears in SPD Identifiability is the same in both games. Social support for defection is reduced in the SPD than in DPD, because some members may consider defection too risky and not in the group interest. Schema-based distrust is reduced in the SPD than in DPD, because group members observe reduced tendency for their own group to defect and infer that the other group is less likely to defect as well. Smart-Strategy Persuasion power to defect is reduced in the SPD than in DPD, because with uncertainty it is harder to figure out that defect is the smart strategy and convince other members.

14. Why Groups Cooperate More than Individuals in SPD - Safety Oriented to Avoid Guilt and Blame People take less risk when their decisions affect others (Charness and Jackson 2008) In DPD  Defection is always better off  No ex post guilt or blame In SPD  Defection has a higher expected payoff, but also a higher probability of suffering a loss.  If a large loss follows defection  ex post guilt and ex post blame for the one who suggested defection  Group members favor safety-oriented strategy (cooperation) to avoid ex post guilt and blame  Reversed discontinuity effect

15. Why Groups Cooperate More than Individuals in SPD -Social Pressure to Conform to Certain Norms Three norms are most relevant in PD games: Being pro-group, Being smart, and Being nice Similar to the group morality and individual morality argument (Cohen 2006; Pinter 2007) In DPD  Both pro-group (group morality) and smart norm clearly indicate defection  Niceness (individual morality) is clouded In SPD  Unclear what strategy is pro-group and smart  Being nice is socially desirable and more salient than in DPD.

16. Major Findings of Study 1 Replicated the discontinuity effect in the DPD game. Four explanations were offered to explain the discontinuity effect. Found a reversed discontinuity effect when uncertainty existed: groups were more cooperative than individuals in the SPD game. Two explanations are proposed to explain the reversed discontinuity effect: safety oriented behavior and social pressure to be nice.

17. Outline Introduction and Motivation Major Finding on Group Cooperation Under Uncertainty  Study 1: Group-Individual Cooperation Difference in Deterministic and Stochastic PD Why do Groups Cooperate More than Individuals Under Uncertainty?  Study 2: Group-Individual Risk Preference Difference  Study 3: 3-Option Stochastic PD  Study 4: A Survey Study Generality Discussion and Future Research  When does uncertainty reduce inter-group competition and encourage inter-group cooperation?  Future research on group factors and game factor

18. Experiment Design 2 Types of players  36 Individuals and 50 groups  Between-subject design Play against a computer player in a SPD:  The same payoff table as in Table 2  The probability of computer investing is known  Table 8: Invest Probabilities of the Computer Player in Study 2 Round Number12345678910 Probability of Investing 60 % 55 % 54 % 53 % 50 % 49 % 47 % 42 % 31 % 17 %

19. Rationale and Hypothesis Rationale  This design removed any interactive motivations for cooperation  The only benefit from one player’s investment was to reduce her own risk of suffering a loss  The investment difference between groups and individuals in Study 2 is determined by their difference in risk preference. Hypothesis  Guilt aversion and blame avoidance indicate more risk aversion and/or less risk seeking  H1: Groups are more risk concerned and invest more often than individuals in Study 2

20. Results at Study 2

21. Major Finding and Limitations Supporting H1, groups invested more frequently than individuals in Study 2 Cannot distinguish between group risk aversion and individual risk seeking Group-individuals difference is smaller than in Study 1  Other reasons besides risk preference difference  Groups who had similar risk preference to individuals might invest more frequently because they had higher cooperation expectation than individuals

22. Outline Introduction and Motivation Major Finding on Group Cooperation Under Uncertainty  Study 1: Group-Individual Cooperation Difference in Deterministic and Stochastic PD Why do Groups Cooperate More than Individuals Under Uncertainty?  Study 2: Group-Individual Risk Preference Difference  Study 3: 3-Option Stochastic PD  Study 4: A Survey Study Generality Discussion and Future Research  When does uncertainty reduce inter-group competition and encourage inter-group cooperation?  Future research on group factors and game factor

23. Study 3: 3-Option Stochastic Prisoner’s Dilemma Subjects: 40 individual and 38 Groups Between-subject design Players had three options: Withdraw, or Invest, or Not Invest  One or both players withdrew  both received a certain outcome  No one withdrew  SPD game in Table 2

24.  Table 9: Possible outcomes in the 3-option SPD game Player 2 WithdrawInvestNot Invest Player 1 Withdraw-50,-50 Invest-50,-50-45; -45 20% lose 145,80% lose 45; 40% lose 100,60% lose 0 Not Invest-50,-50 40% lose 100,60% lose 0; 20% lose 145,80% lose 45 52% lose 100,48% lose 0; 52% lose 100,48% lose 0

25. Table 11: Player ’ s Decision in the 3-option SPD game Player 1 ’ s Expectation of Player 2 Invest (Trust)Not Invest (Distrust) Risk Preference of Player 1 Risk Seeking Preference: Paying 50 <Paying 45 < 40% losing 100 Preference: Paying 50 < 20% losing 100, plus paying 45 < 52% losing 100 Behavior: Not Invest Risk Averse or Risk Neutral Preference: 40% losing 100 < paying 50< paying 45 Preference: 52% losing 100 < 20% losing 100, plus paying 45 < paying 50 Behavior: InvestBehavior: Withdraw Table 12: Implications of Three Possible Decisions DecisionsRisk PreferenceTrust WithdrawRisk averse or neutralDistrust InvestRisk averse or neutralTrust Not InvestRisk seekingIrrelevant

26. Hypotheses in Study 3 H2 (Individual Risk Seeking Hypothesis): Individuals choose Not Invest (Risk Seeking) more frequently than Groups do; H3 (Group Trust Hypothesis): For those players who are risk averse or neutral, groups choose Invest (Trust) more frequently than individuals. Individuals are more likely to Withdraw (Distrust).

27. Figure 5: Mean Proportions of the Three Options

28. Major Findings and Limitations H2 is confirmed: groups are less risk seeking than individuals H3 is rejected.  No evidence on groups being more trusting.  Uncertainty did reduce the usual inter-group distrust. Questions remain to be answered:  Are guilt aversion and blame avoidance underlying group-individual risk preference difference?  Role of social norms?

29. Outline Introduction and Motivation Major Finding on Group Cooperation Under Uncertainty  Study 1: Group-Individual Cooperation Difference in Deterministic and Stochastic PD Why do Groups Cooperate More than Individuals Under Uncertainty?  Study 2: Group-Individual Risk Preference Difference  Study 3: 3-Option Stochastic PD  Study 4: A Survey Study Generality Discussion and Future Research  When does uncertainty reduce inter-group competition and encourage inter-group cooperation?  Future research on group factors and game factor

30. Study 4: A Survey Study Three conditions  Individual Survey (IS) with 32 participants;  Group Private Survey (GPS) with 72 participants (24 groups);  and Group Shared Survey (GSS) with 78 participants (26 groups). Between-subject Design Each person finished a survey after the quiz and before playing the SPD game

31. Group Identity, Inter-group Anticipation, and Group Trust No evidence that group membership or anticipation of interacting with another group had an effect on players’ choice; Partial evidence that groups might be more trusting than individuals in the SPD game, at least at the beginning of the game.

32. Table 13: Reasons for Not Suggesting Defection Niceness Norm4% Guilt Aversion47% Blame Avoidance55% Persuasion Concern29% Does Not Care Enough23% Guilt Aversion, Blame Avoidance, and Social Norm

33. Summary: Why Groups Cooperated More than Individuals under Uncertainty Guilt aversion and blame avoidance drove group members to be more cautious and less risk seeking than individuals Mixed evidence on whether groups had higher cooperation expectation level on the other group than individuals did on the other individual No evidence of social pressure pushing groups to be nicer and more cooperative than individuals, at least not before the group discussion

34. Discussion and Future Research When does uncertainty encourage inter-group cooperation and when does it reduce inter-group competition only? Generality Studies  Group factors: decision rules, leadership, heterogeneous groups  Game factors: gain/loss domain, length of the game, communication between players, nature of uncertainty, coordination game, multi-player games