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Avoiding the Sharp Tongue: Anticipated Written Messages Promote Fair Economic Exchange

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journal contribution
posted on 01.10.2008, 00:00 authored by Erte Xiao, Daniel Houser
Research in economics and psychology has established that informal non-monetary sanctions, particularly expressions of negative emotion or disapproval, can enforce fair economic exchange. However, scholars are only beginning to understand the reasons non-monetary sanctions affect economic outcomes. Here we provide evidence that a preference to avoid written expression of disapproval, or negative emotion, plays an important role in promoting fair decision making. We study one-shot Dictator games where one subject has the right to determine a division of an amount of money between herself and her receiver. In relation to the standard game, we find significantly fewer earning-maximizing decisions when receivers can react to offers with ex post written messages. We further find that credible threats of monetary sanctions, while economically inefficient, are significantly more effective than written messages in deterring selfishness. Our data provide new perspectives on the role of communication in promoting economic efficiency in social environments, and support economic theories of decision incorporating psychological factors such as guilt, shame, and self-deception.




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