1. Group Cooperation Under Uncertainty Min Gong, Jonathan Baron, Howard Kunreuther 11/16/2008

2. Outline Motivation Experimental Design Results Explanations Conclusion and Future Research

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. 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

6. 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

8. 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.

9. 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)

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 g roup 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 h arder to figure out that defect is the smart strategy and convince other members.

14. Why Groups Cooperate More in SPD - Motivation 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 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 Individual members favor safety-first strategy (cooperation) to avoid ex post guilt and blame  Reversed discontinuity effect

15. Why Groups Cooperate More 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 In DPD Both Pro-group and smart norm clearly indicate defection Niceness (cooperation) is clouded In SPD Unclear what strategy is Pro-group and smart Being nice is socially desirable and more salient than in DPD.

16. Conclusions/Major Findings 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 provided to explain the reversed discontinuity effect.

17. Future Extensions Generality of the phenomenon loss/gain domain Games with two Nash equilibria Deeper understanding of group decision making under uncertainty Are either of the two explanations necessary or sufficient for the reversed discontinuity effect in SPD? Are there any other undiscovered reasons for groups to be more cooperative than individuals under uncertainty? Role of communication, conflicts of interest, number of groups, etc. Practical applications to encourage group cooperation in social dilemmas