The last experiment in Humanomics is a variation of a treatment in an article by Mary Rigdon, Kevin McCabe, and Vernon Smith. In my version, people are paired to play the following extensive form game: Person 1 makes the first decision by either ending the game or passing the play to Person 2. If Person 1 plays right, both people receive 40¢ that round. If Person 1 plays down, then Person 2 can either play right, yielding 0¢ for Person 1 and 160¢ for herself, or she can play down, yielding 60¢ for Person 1 and 100¢ for herself.
The students are told that "[t]his experiment will last for several rounds. Each round you are matched with a person in this room." They are not told the exact number of rounds nor how they are matched. I have now run this experiment at least 100 times in classes and workshops and every time someone asks the question, "Are we matched with the same person each round?" To which I reply, "Each round you are matched with a person in this room." Thinking that I did not understand the question, the student inevitably repeats it and I pertinaciously recite back the line from the instructions. After a couple exchanges of this sort, the students conclude that I am not going to tell them how they are matched. The point of the experiment is that the matching algorithm is unstated.* I want the students to know that they are matched with a person and not a computer robot. The question is what do they do when there is some doubt as to who they are encountering each round.
The experiment lasts for 20 rounds. Here are the results for the two sections: Roughly 95% of the sessions that I have conducted look like section 2 by the end of the experiment. They also track quite closely what Rigdon et al. find with slightly different payoffs for the last 5 rounds: 47% of Person 1's end the game, 44% of pairs end up at the equivalent of the (60,100) outcome, and 9% of the pairs end up at the equivalent of the (0,160) outcome. Never before have I seen a session like section 1.
My first question after displaying the results is, "How do you think you were matched?" Half of the people report that they must have been matched with the same person each round. Both people repeatedly played down. It is not uncommon for a pair to be unknowingly matched with the same person each round and achieve the (60,100) outcome reach round. The other half of the Person 1's are unsure. They say they played down a few times, got burned more often than not, gave up trying, and are not quite sure about how they were matched. Their corresponding Person 2's are noticeably quiet. I wonder why.
Then I reveal the matching algorithm. The software counts how many times over the previous 5 rounds each Person 1 and Person 2 played down, ranks them from highest to lowest, and then matches them by rank in the current round. In the baseline treatment in Rigdon et al., which I did not conduct, the participants are randomly matched each round. When randomly matched, Person 1's who play down are likely to encounter Person 2's who play right so that by the end of the experiment 73% of the Person 1's end the game. Only 14% of the pairs reach the equivalent of the (60,100) outcome.
In Humanomics, we conduct this experiment before we read and discuss chapters 4 and 7-9 of Deirdre McCloskey's The Bourgeois Virtues. McCloskey argues that something more than material payoffs is necessary to make commerce work. Even though we may not see it, she argues that the bourgeoisie practice the virtue of love in commerce. Not eros, obviously, but a sense of solidarity in the form of a trust that transcends material payoffs.
Why is it that Person 1's who play down expect that Person 2's will do the same? And why are they vocally disappointed, if not indignant, in the debriefing when Person 2's do not? Person 1 does not expect Person 2 to do as she pleases but to exercise her personal judgment and act as she must, as one does in a personal interaction with another human being. When another person is involved, the situation is not a solipsistic game against nature. Sure, payoffs matter, but they do not matter to the exclusion of the consideration that another person is involved. A sense of we transcends the pecuniary calculation when a positive sum gain is on the line.
When Person 2 plays down, it is because in some small way she cares about Person 1. That kind of love for another person is the point of the (60, 100) outcome, and it is what a Person 1 is looking for in a Person 2.
*Please note that I am not deceiving the students. I am not misleading by false appearance or statement. I am simply leaving it open to the students to infer how they are encountering each other.