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Social Norms and Naïve Beliefs

Social Norms and Naïve Beliefs. Amrish Patel and Edward Cartwright. Thursday 4 th September, IAREP/SABE World Meeting 2008, Rome, Italy. Social Norms and Naïve Beliefs. Patel IAREP/SABE 2008. Why conform?. Exogenous taste (Matsuyama, 1991) Genetic fitness

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Social Norms and Naïve Beliefs

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  1. Social Norms andNaïve Beliefs Amrish Patel and Edward Cartwright Thursday 4th September, IAREP/SABE World Meeting 2008, Rome, Italy.

  2. Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 Why conform? • Exogenous taste (Matsuyama, 1991) • Genetic fitness (Fudenberg and Maskin, 1990; Carmichael and MacLeod, 1997) • Informational conformity (Bikhchandani, Hirshleifer and Welch, 1998; Chamley, 2003) • Coordination benefits (Sugden, 1986; Young, 1996; Young, 2001) • Normative conformity (Akerlof, 1980; Bernheim, 1994; Nyborg and Rege, 2003)

  3. Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 Signalling models of conformity Sender undertakes some observable action (signals) Receiver Observes action and infers type; some types are more valued than others. Sender Type is private information e.g. generosity, innate productivity, discount rate. Receiver offers sender a ‘reward’ or ‘punishment’ based on his inference, e.g. esteem or future favours.

  4. Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 Equilibria and beliefs • Separating equilibria→ no social norm • Pooling equilibria → social norm existence • Receivers inference of senders type critical • Literature assumes Bayesian rationality • Is this realistic? • Lack of desire and/or ability to be Bayesian (e.g. cost-benefit, trust, information etc) • Clearly not all receivers are Bayesian…

  5. Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 Naïve beliefs • The Fundamental Attribution Error Over-attributing observed behaviours to personal rather than situational causes (Jones and Harris, 1967). • A Belief in the Law of Small Numbers Exaggerating the extent to which a small sample represents the population (Tversky and Kahneman, 1971). • Naïve beliefs: taking actions at ‘face value’. • Compare equilibria where all agents have Bayes rational beliefs with equilibria where a subset are Naïve.

  6. Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 A model of working hours • Ingroup (e.g. colleagues), ,and outgroup (e.g. friends), , are sets with a continuum of agents. • Each worker in chooses his working hours , from the set . • Agent’s type, , his solution to textbook labour supply problem is private information. • Intrinsic U, ; max at . • Esteem U, ; max at . • Action function, .

  7. Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 A model of working hours • Payoff function of a worker of type , • are relative weights on esteem utilities. • A Signalling Equilibrium • Actions optimal given beliefs • All agents have Bayes rational beliefs. • A Naïve Equilibrium • Actions optimal given beliefs • Ingroup have Bayes rational beliefs, Outgroup are naïve.

  8. Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 Result 1: Naïve beliefs weakennorm existence A pooling signalling equilibrium A separating naive equilibrium Action functions when lambda = 0.1 and theta = 1

  9. Hours 8 10 12 20 0 Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 Result 2: Naïve beliefs reduceset of possible norms • Exists a unique central norm • Symmetric model so just consider max norm • Difference surface weakly positive therefore, • Norm closer to social optimum Difference between max for signalling versus naïve equilibrium

  10. Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 Explanation Result 1 • Naïve beliefs → shade actions towards middle. • Bayes rational beliefs → imitate more desirable types. • Naïve beliefs do still have a positive effect on conformity in conjunction with Bayes rational beliefs. Result 2 • Esteem: Bayes rational (believed type); naïve (action). • Only the former can give high esteem at a norm ≠10. • Loss in intrinsic U from norm compliance is less likely to be compensated at a norm ≠10 with naïve agents → deviate.

  11. Social Norms and Naïve Beliefs Patel IAREP/SABE 2008 Conclusion • Naïve beliefs are important: affect the existence of social norms and encourage norms closer to the social optimum. Further work: • Naïve beliefs in evolutionary models of norms. • Model a continuous degree of naivety, endogenise belief type and let agents learn to be rational. • Test for existence and effects of naïve beliefs experimentally. • Identify the class of signalling models for which naïve beliefs act as an equilibrium selection device. • Analyse a more complex esteem function. Thank you

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