Question

A researcher is conducting a modified dictator game. In the baseline treatment (Treatment 1, or T1), he forms pairs randomly and in each pair there is one dictator and one recipient. Each pair has $5 as endowment and a dictator has to decide how much to give to his/her recipient from the endowment. Pairs do not meet each other before/during/after the experiment. Then he adds another treatment (Treatment 2, or T2) where it is stated that the dictators can give any amount in between -$5 and +$5. In T1, he finds average giving is $1.33. What do you think he would find in T2?

	a.	Average giving would be less than zero.
	b.	Average giving would be $1.33.
	c.	Average giving would be greater than $1.33.
	d.	Average giving would be $5.
	e.	Average giving would not be significantly different from $1.33.

Answer 1

Since the range of giving expands from 0 to $5 to -$5 to +$5, the average giving rate would fall. As a result, it will definitely be below 1.33

Also, since there is a possibility of a negative value as well and it is anonymous, behavioural economics suggest that many dictator would prefer putting a negative value which leads to the assumption thatthe average giving might be less than 0.

It will definitely be less than 1.33. So option b,c,d and e are excluded.

So the correct answer is Average giving would be less than zero.

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