Alternative Motivations for Behavior:

Fairness, Altruism, Reciprocity

I. Introduction

A. Experimental results often point out anomalies with theory: divergence between
actual play and game theoretic predictions based on players maximizing expected
monetary returns
B. Potential reasons for divergence between experiments and theory
1. People are “irrational” – fail to choose strategies in their best interest.
a. Psychologists find evidence of lack of complete rationality in human
behavior
b. Example: preference reversals (Tversky and Thaler Journal of Economic
Perspectives Spring 1990: 201-11) Choice between:
• H bet: 8/9 chance of $4, 1/9 chance of $0
• L bet: 1/9 chance of $40, 8/9 chance of $0
People predominantly choose H bet. But – they price the L bet higher
c. Decision-making under uncertainty - people routinely violate expected
utility maximization. Example from Tversky and Kahneman. 1981. The
framing of decisions and the psychology of choice. Science 211: 453-45
• Choice problem - (A) or (B):
A) Gain $100 with probability 1
B) Gain 0 with probability 0.75, Gain $400 with probability
0.25
Most people choose (A) – risk averse behavior
• You walk in the room and are given $400. Choice problem - (C)
or (D):
C) Lose $300 with probability 1
D) Lose 0 with probability 0.25, Lose $400 with
probability 0.75
Most people choose (D) – risk loving behavior in losses
(loss aversion)
• Expected utility maximizers: if choose (A) then must choose (C), if
choose (B), must choose (D)
d. If people are totally irrational/purposeless then there is little left of much
of economics or game theory.
e. We can still make progress if people are generally rational but with some
inconsistencies
2. Bounded rationality: failure to understand the game or the consequences of
choices leading to failure to play equilibrium strategies
a. Limited cognitive capacity/ability to process information
b. Complexity of game may overwhelm player’s ability to calculate; or cost
of information processing too high to be worth it (think of how you played
some of the dynamic games of incomplete information when confronted
with them for the first time)
c. Players fall back on simple rules/heuristics to choose strategies

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 d. If bounded rationality is the explanation for divergence between play and
theory then we should expect convergence to Nash equilibrium with
experience (or with size of stakes – high cost of errors)
e. Ultimatum and dictator games are extremely simple and yet we witness
systematic divergence between actual play and predictions of game theory
based on maximizing expected monetary returns
3. Utility ≠ monetary returns
a. What enters into utility functions is much more complicated than simply
the monetary payoffs
b. What determines utility payoffs?
i. Direct material gain (typical assumption in economics)
ii. Altruism: care about the welfare of others and not strictly self-
interested (Gintis: we call people who are strictly motivated by
self-interest sociopaths)
iii. Fairness: people want to be treated fairly, and to treat others fairly,
and may sacrifice material gains to achieve more fair outcomes.
One form of fairness is inequality aversion: players may reject
getting a higher return when other players get more in favor of all
players getting equal lower payoffs
iv. Reciprocity: people may wish to be nice to those that are nice to
them and punish those that are mean to them, even when being
nice or being mean may lower direct material gain (costly rewards,
costly punishments)
v. Image: how do other people perceive you? Are you fair? Are you
generous? Image may be important for reasons of reciprocity but
it also may be important for a person’s self-esteem.
vi. Social standing: a person’s position in the social hierarchy may be
of importance
vii. Other…?
c. How does the incorporation of these types of utility considerations affect
strategy choice and equilibrium? Potentially rich area of investigation

II. Fehr and Schmitt (QJE 1999): A Theory of Fairness, Competition and Cooperation

A. The strategies of players in many games do not conform to predictions of game

theory if the utility function of a player is assumed to depend only on the
monetary payoff of the player
1. Ultimatum game. Players should offer only a small positive amount to other
player who should accept it. In reality there are many players who offer 50-50
split.
2. Public goods contribution (N-player prisoner’s dilemma): players should all
defect but in reality many give positive amounts.
3. Public goods contribution with costly punishment: opportunity to inflict
punishment on defectors, which is also costly to those inflicting the
punishment, increases cooperation markedly.

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 B. Addressing the theory-experiment gap in simple games: inequality averse utility
function
1. One explanation for divergence of theory and actual play in experiments is
that we have the wrong utility function – people care about more than just
their own monetary payoffs
2. Fehr and Schmitt propose a different utility function based partly on monetary
returns and partly on “inequality aversion”
3. Setup:
a. Players i = 1, 2, …, n
b. Monetary payoffs for player i: xi
c. x = (x1, x2,…, xn)
4. Utility function:
1 1
U i ( x ) = xi − α i ∑
n − 1 j ≠i
max{x j − xi ,0} − β i ∑ max{xi − x j ,0}
n − 1 j ≠i
5. Interpretation:
a. First term is standard monetary return
b. Second term is loss from inequality where the player has lower
monetary return than other players
c. Third term is loss from advantageous inequality (higher payoff than
other players)
d. Assume that β i ≤ α i : players feel losses when they suffer inequality at
least as acutely as when others suffer inequality
Ui(xj|xi )

xi xj

C. Application to ultimatum game

1. Two person version of the utility function
U i ( x) = xi − α i max(x j − xi ,0} − βi max(xi − x j ,0)
2. Suppose the two players are to divide a prize and set the prize to be 1
3. Player 1 is proposer and player 2 is responder
4. Let s = share offered to the responder (so 1-s is the share kept by the proposer)
5. Note that proposer will not wish to offer s > 0.5 as long as some offer s ≤ 0.5
will be accepted, and s = 0.5 always will be accepted. Restrict attention to s ≤
0.5
U ( s ) = s − α 2 max((1 − s ) − s ),0} − β 2 max( s − (1 − s ),0)
6. Utility of responder: 2
= s − α 2 max(1 − 2s ,0) − β 2 max( 2 s − 1,0)

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 α2
7. Dominant strategy for responder to reject any offer: s ≤ s ' = ≤ 0.5
(1 + 2α 2 ) as
this makes utility less than zero for responder.
0.5 if β 1 > 0.5
8. Proposer: equilibrium strategy is to offer: s = [ s ' ,0.5] if β 1 = 0.5
s ' if β < 0.5
 1

D. Summary
1. Equilibrium accounts for many of results of experiments:
a. No offers above 50%
b. Many offers of 50%, which are always accepted
c. Low offers likely to be rejected
2. In market games – they find that players converge to competitive equilibrium
even when such play is “unfair”. Why is this? In market settings no single
player can enforce an equitable outcome so notions of fairness do not seem to
matter to determination of outcome.
3. Results raise interesting implications of role of markets and perceived fairness
(desirability) of outcomes.

III. Rabin (AER 1993): Incorporating Fairness into Game Theory and Economics

1. Psychological games: payoffs depend upon beliefs/motivation and not just

outcomes
a. Rabin approach: whether an action is preferred to alternative action
depends upon:
i. the direct material payoff
ii. the belief about whether rival players are being helpful or harmful
iii. whether action helps or hurts rival players
b. If I believe you are trying to help me, I get added benefit from choosing a
strategy that helps you. But if I believe you are trying to hurt me, I get
negative benefit from choosing a strategy that helps you, and a positive
benefit from a strategy that harms you (revenge is sweet!).
c. Note: it is not sufficient to model emotions directly by transforming the
payoffs and analyzing the transformed game in the normal way.
Expectations (beliefs) and emotions based on these expectations are
essential.

1. Simple example of psychological game

a. Suppose utility for player i depends upon player i’s material payoff
( π i ( ai , a j ) ) plus i’s belief about whether the rival is helpful or harmful to
player i and the rival’s payoff.
b. Let αi = 1 when player believes that rival is trying to be helpful, 0 when
player believes rival is neutral, and -1 when player believes that rival is
trying to cause harm.

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 c. Let βi ≥ 0 equal the rate at which gain/loss in rival’s material payoff
affects player i’s utility.
d. Utility for player i: Ui = π i ( ai , a j ) + αi βi π j ( a j , a i ) .
e. Note: standard game theory is a special case where αi βi = 0.

2. Example: Battle of the Sexes

Ballet Football
Ballet 2, 1 0, 0
Football 0, 0 1, 2

a. Pure strategy Nash equilibrium (B,B) and (F, F).

b. “Fairness equilibrium”: consider (B, F). Players’ expectations are based on
this combination of strategies.
c. With (B, F), player 1 thinks that player 2 is being mean (if they would just
play B then we would both be better off). Therefore, α1 = -1.
• Player 1’s payoff playing the “equilibrium” strategy:
U 1 ( B, F ) = π 1 ( B, F ) + α1 β1π 2 ( B, F ) = 0 + ( −1) β1 0 = 0
• Player 1’s payoff is they deviate (play F instead):
U 1 ( F , F ) = π 1 ( F , F ) + α1 β1π 2 ( F , F ) = 1 + (−1) β1 2 = 1 − 2 β1
• So, if β1 ≥ ½, then B gives the highest utility for player 1, given the
expectations of (B, F) and the emotions that follow.
• Player 1 would rather stick to a strategy that yields a lower payoff because
it also harms player 2, who after all is being mean to player 1.
d. With (B, F), player 2 thinks that player 1 is being mean (if they would just
play F then we would both be better off). Therefore, α2 = -1.
• Player 2’s payoff playing the “equilibrium” strategy:
U 2 ( B, F ) = π 2 ( B, F ) + α 2 β 2 π 1 ( B, F ) = 0 + ( −1) β 2 0 = 0
• Player 2’s payoff is they deviate (play B instead):
U 2 ( B, B ) = π 2 ( B, B) + α 2 β 2π 1 ( B, B ) = 1 + (−1) β 2 2 = 1 − 2 β 2
• So, if β2 ≥ ½, then F gives the highest utility for player 1, given the
expectations of (B, F) and the emotions that follow.
• Player 2 would rather stick to a strategy that yields a lower payoff because
it also harms player 1, who after all is being mean to player 1.
e. (B, F) can be a fairness equilibrium. (As can (F, B), (B, B), (F, F)).

3. Example: Game of Chicken

Straight Swerve
Straight -2, -2 2, 0
Swerve 0, 2 1, 1

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 a. In the prior example, expanded the set of equilibria – Nash equilibrium are
fairness equilibrium, but additional strategy combinations are also fairness
equilibrium. But – Nash equilibrium need not be fairness equilibrium.
b. (Swerve, Straight) is a Nash equilibrium. Is it necessarily a fairness
equilibrium?
• Player 1: α1 = -1, since Straight by player 2 harms player 1
• Utility when player 1 plays the “equilibrium” strategy (Swerve):
U1 ( Sw, St ) = π 1 ( Sw.St ) + α1 β1π 2 ( Sw, St ) = 0 + (−1) β1 2 = −2 β1
• Utility when player 1 plays Straight:
U 1 ( St , St ) = π 1 ( St , St ) + α1 β1π 2 ( St , St ) = −2 + ( −1) β1 = −2 + 2 β1
• If − 2 + 2β1 > − 2β1 , then Swerve is not the best strategy for player 1
given expectations of (Sw, St) and the emotions that follow. For β1 > 1 / 2
player 1 would rather choose Straight rather than Swerve even though
player 1 beliefs that player 2 will choose Straight.
• Note: here is a case where mutual assured destruction (St, St) could be a
fairness equilibrium (I’m so mad at you that I will blow both of us up to
get back at you….). Not a cheerful thought!

4. Fairness Equilibrium
a. Confine attention to two player games: i = 1, 2.
ai ∈ Ai is a strategy of player i
a = {a1, a2}
bi ∈ Ai is player j’s belief about player i’s strategy
ci ∈ Ai is player i’s beliefs about what player j believes about player i’s
strategy
b. A strategy a ∈ A is a fairness equilibrium if for i = 1, 2
ai ∈ arg max a i ∈ Ai U i ( a i , a j , b j , ci )
and ai = bi = ci.
c. Note: the definition of fairness equilibrium is quite similar to Nash
equilibrium with addition of beliefs (and very similar to Bayesian Nash
equilibrium that we will come to later in the course). Two parts: i) choose
strategy that gives highest utility and ii) in equilibrium beliefs about
strategies are correct.
d. To make fairness equilibrium operational, we need to specify the utility
function. Rabin suggests a specific utility function that included both
direct monetary payoffs as well as a specific “kindness function.”

7. Utility and kindness functions

a. Rabin assumes a specific kindness function that depends on comparison of
actual payoffs with “fair payoffs.”
b. Start from a strategy combination with player i playing ai and player j
playing bj. How kind would player i be to player j in playing ai given that
player i believes that player j will play bj?
c. Define the following payoffs given that player i plays ai and player i
believes that player j will play bj:

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 π j (b j , a i ) = player j’s payoff if j plays strategy bj and i plays strategy ai.

π hj (b j ) = player j’s highest payoff when player j plays strategy bj

(choose ai that gives j the best payoff given bj)
π lj (b j ) = player j’s lowest Pareto efficient payoff when player j plays
strategy bj
π ej (b j ) = [π hj (b j ) + π lj (b j )] / 2 = player j’s equitable payoff

π min
j (b j ) = player j’s worst possible payoff when playing strategy bj

d. Player i’s kindness to player j is given by

π j (b j , ai ) − π ej (b j )
f i (ai , b j ) =
π hj (b j ) − π min
j (b j )
e. Player i will be kind to player j when the actual payoff is greater than the
equitable payoff: π j (b j , ai ) − π ej (b j ) > 0, and unkind when

π j (b j , ai ) − π ej (b j ) < 0.
f. Player i’s belief about how kind player j is being to player i when player i
believes that player j plays bj and believes that player j believes that player
i plays ci, is given by
~ π i (ci , b j ) − π ie (ci )
f j (b j , ci ) =
π ih (ci ) − π imin (ci )
π i (bi , a j ) − π ie (bi )
= f j (a j , bi ) =
π ih (bi ) − π imin (bi )
The latter set of equalities holds in equilibrium because expectations are
correct (what I believe about how kind you are is in fact how kind you
are…)
g. Utility function for player i:
~
U i (ai , b j , ci ) = π i (ai , b j ) + f j (b j , ci )[1 + f i (ai , b j )]
h. Utility is composed of direct material payoffs plus a term for whether rival
player is kind or unkind (could drop this part) plus a term for rewarding
kind rivals and hurting unkind rivals

8. Application: Monopoly Game

a. Consumers who feel that a monopolist is being unfair by charging high
price may choose not to buy from the firm even though they value the item
more than the price. If so, then considerations of fairness may require the
monopolist to lower price.
b. Rules of the game:

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 i. Monopolist can produce a single unit at cost c and chooses a price
p.
ii. Consumer has value for the single unit of v and chooses a
reservation value r.
iii. Simultaneous choice of p and r.
iv. Material payoffs:
• if p ≤ r , monopolist gets p – c; consumer gets v – p
• if p > r, then no sale and both players receive payoff of 0.
c. Standard monopoly analysis: profit maximizing price is to set p = v, so
the monopolist will get all consumer surplus.
d. Standard game theory analysis: if simultaneous play then there exist
multiple Nash equilibrium: any p = r = z for z ∈ [c, v] is an equilibrium.
e. Analysis: is there a fairness equilibrium where p = r = z for z ∈ [c, v] ,
and for what values of z does it exist?
i. Kindness function for how consumer is treating the monopolist,
fC(r,p):
• If consumer sets r ≥ p:
π ( p, r ) − π Me ( p)
f C (r , p) = Mh
π M ( p) − π Mmin ( p)
( p − c) + ( p − c)
p−c−
= 2
( p − c) − 0
0
= =0
p−c
Given p, the monopolist always receives a payoff of p – c
regardless of choice of r (conditional on r ≥ p). The highest and
lowest Pareto payoff are the same and π j (b j , ai ) − π ej (b j ) = 0.
The consumer is being neutral toward the monopolist (neither kind
nor unkind).
• If r < p,
π ( p, r ) − π M e
( p)
f C (r , p ) = M
πM h
( p) − π Mmin
( p)
( p − c ) + ( p − c)
0−
= 2
( p − c) − 0
− ( p − c)
= = −1
p−c
The consumer is minimizing the payoff to the monopolist and
fc(r,p) = -1 when r < p
ii. Kindness function for how the monopolist is treating the
consumer: fM(p,r):

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• If p is set such that r ≥ p:
π C (r , p) − π Ce (r )
f M ( p, r ) = h
π C (r ) − π Cmin (r )
(v − c ) + (v − r )
(v − p ) −
= 2
(v − c ) − 0
c + r − 2p
=
2(v − c)
Note that when p = r = z, then
c−z
f M ( p, r ) = <0
2(v − c)
The consumer feels that monopolist is being unfair by charging
a price above cost.
• If p > r:
π C (r , p) − π Ce (r )
f M ( p, r ) = h
π C (r ) − π Cmin (r )
(v − c ) + ( v − r )
0−
= 2
( v − c) − 0
c + r − 2v
= <0
2(v − c )
~
iii. Consumer utility: U C = π C ( r , p) + f M ( p, r )[1 + f C (r , p )]
• Assume that p = z
• In an equilibrium, expectations equal reality so that
~
f M ( p, r ) = f M ( p, r )
• When consumer sets r = z:
~
U C = π C ( z , z ) + f M ( z , z )[1 + f C ( z , z )]
= π C ( z , z ) + f M ( z , z )[1 + f C ( z , z )]
c−z
= (v − z ) + [1 + 0]
2(v − c)
• When consumer sets r < z:
U C = π C (r , z ) + f M (r , z )[1 + f C (r , z )]
= 0 + f M (r , z )[1 − 1] = 0
• When is setting r = z better than r < z? This is true when:
c−z
(v − z ) + ≥0
2(v − c)
2v 2 − 2cv + c
z≤
2v − 2c + 1

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 • Given that v > c, it follows that z < v. Therefore, if the
price of the monopolist is set too close to v, the consumer
will refuse to pay it and no trade will occur leaving both
players worse off in material terms (i.e., gains from trade
will fail to be realized).
• Note that r >z generates the same returns as r = z so we
don’t need to worry about deviations in this direction.
~
iii. Monopoly utility: U M = π M ( p , r ) + f C ( r , p )[1 + f M ( p, r )]
• Assume that r = z
• When the monopolist sets p = z:
~
U M = π M ( p, r ) + f C (r , p)[1 + f M ( p, r )]
= ( z − c) + 0[1 + f M ( p, r )]
= z−c
• When the monopolist sets p < z:
~
U M = π M ( p, r ) + f C (r , p)[1 + f M ( p, r )]
= ( p − c) + 0[1 + f M ( p, r )]
= p−c
This value is lower than for setting p = z. Monopolist
lowers the price resulting in lower direct payoffs. This
helps the consumer but since the consumer is neutral
toward the monopolist there is no advantage for the
monopolist to help the consumer.
• When the monopolist sets p > z:
~
U M = π M ( p , r ) + f C (r , p )[1 + f M ( p , r )]
c + r − 2v
= 0 + ( −1)[1 + ]
2(v − c )
r −c
= −[ ]<0
2(v − c )
The monopolist would not choose to set p > z = r as then
no sale would take place, leaving the monopolist worse off.

f. Highest price that the monopolist would charge is strictly less than the
monopolists profit maximizing price p = v. The monopolist will lower
price because of the consumer’s belief that the monopoly price is unfair.
g. Note: this may explain claims of “price gouging.” In standard theory there
is no meaning to price gouging (a firm should charge the profit
maximizing price). But with notions of fairness, you can have “unfair
prices” or “price gouging.”

9. Incorporating notions of fairness and reciprocity is a promising direction and may

be essential if game theory wishes to predict the actual behavior of players in
games. Doing so is not trivial. It requires a translation from material payoffs to
utility payoffs and incorporation of beliefs. Inferences about beliefs (what is fair?)

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 may not be readily observable and adds a level of complexity to understanding
and interpreting experimental results.
IV. Andreoni and Bernheim. 2009. Social image and the 50-50 norm: a theoretical and
experimental analysis of audience effects. Econometrica 77(5): 1607-1633.

A. Introduction
1. In many situations involving division of rents among two parties, we observe
a 50-50 split (“fair” allocation)
a. Bargaining
b. Even in dictator games – where people could take it all, many people
choose to split evenly
2. Can we derive a theory that predicts outcomes of behavior in such situations
that match with actual behavior? Seek a theory consistent with the following
stylized facts in a dictator game:
a. Significant fraction of population plays exactly 50-50
b. Very few give away more than 50%
c. There is often a trough in how many give away 40-50%
d. Greater anonymity for the dictator generates more selfish play
3. To explain these facts, A&B build from Fehr and Schmit (1999) that people
care about fairness. In addition, though, they add concerns about “image” -
that “people like to be perceived as being fair.”
a. In order for perception of image to be a motivating factor there must be
some difference among types. Observation of how much the dictator
shares is a signal of how fair they are.
b. Model with this notion of fairness and image concerns explains a number
of the stylized facts

B. Model: stochastic dictator game

1. Players: dictator (D), receiver (R)
2. Shares: receiver gets x ∈ [0,1] and dictator gets (1-x)
3. Two versions of the game
a. Standard dictator game
b. Extended dictator game: with probability p, nature chooses the division:
give x0 to receiver; with probability (1-p) dictator chooses the division. p
and x0 are common knowledge
4. The dictator can be of various types: t ∈ [0, t ] . Let H be the cumulative
probability distribution function on t. Types differ on how much they care
about fairness.
5. Dictator’s utility function depends on:
a. Material payoffs (1-x)
b. Fairness: how equal are the payoffs (x-xF), where xF represents a fair
payoff. Assume xF = ½.
c. Image (m): whether other people think the dictator is playing fair
d. U ( x, m, t ) = F (1 − x, m) + tG ( x − x F )

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 e. Note: dictator’s utility function does not satisfy the “single-crossing
condition typically assumed in a signaling game. The greater is the weight
on fairness, the more bowed the indifference curve will be around ½.

m
UA

UB

1/2 x

f. Beliefs: there is an audience that observes x and forms a cumulative

probability distribution Φ about t. Let B(Φ) be the associated social image
(m).
g. A signaling equilibrium is:
i. A strategy Q that maps t to x (types to actions) and P that maps x to Φ
(signals to beliefs)
ii. Beliefs P that map x to Φ (action to probability over types). Px(t) =
inferred probability that the dictator’s type is not greater than t upon
observing x.
h. Solve the game for perfect Bayesian equilibrium.
i. Like most signaling games there are multiple equilibria
ii. Will use an equilibrium refinement due to Cho-Kreps (1987).

C. Analysis of the standard dictator game

1. There are three potential types of equilibria:
a. Efficient differentiable separating equilibria: all types play a separating
strategy x(t) ≤ ½.
b. Central pooling equilibria: all types play x = 1/2
c. Blended equilibria: types t ≤ t0 play separating x(t) < ½, types t > t0 play x
= ½.

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 2. Comments on equilibrium in the standard dictator game
a. Will get blended equilibrium if people are fair-minded enough. Those
dictators that care about fairness sufficiently will signal by playing x = ½
(going further creates unfairness the other way), while those that don’t will
be take more for themselves and play x < ½.
b. Blended equilibrium explains stylized facts – spike at 50%, trough below
50%.
c. Attaching greater importance to image of fairness will increase the
fraction of types that will play 50%.

D. Analysis of the extended dictator game

1. Now suppose that nature may fix the distribution: with probability p, nature
chooses the division (give x0 to receiver). With probability (1-p) dictator
chooses the division.
2. If observe x0 it may be because nature chose it or because the dictator did so
inference is not as clear as in the standard dictator game.
3. There are again three potential types of equilibria:
a. Blended double pool equilibrium: t0 and t1 such that
i. If t ∈ [0, t 0 ] , then Q(t) = x0
ii. If t ∈ (t 0 , t1 ] , then Q(t) = S(t)

13
 iii. If , then t ∈ (t1 , t ] Q(t) = ½.
b. Blended single pool equilibrium: only Q(t) = x0 and Q(t) = S(t) exist
c. Double pool equilibrium: Q(t) = x0 and Q(t) = ½.
4. Increasing p should increase the percentage of players who play x0 and
decrease the percentage of players playing ½.

E. Experimental results
1. Pairs divide $20 (so $10 is an equal division)
2. Dictators, recipients and outcomes are publicly revealed.
3. Nature intervenes with probability p, transferring x0 and 20−x0 with equal
probabilities (p/2).
4. Consider various values of p: (0, 0.25, 0.5, 0.75)
5. Values of x0: 0 and 1 (both are highly unequal). When x0 = 0, condition 0,
when x0 = 1, condition 1.

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F. Conclusions
1. Results are quite consistent with the theory. A&B are able to predict
responses in dictator game quite accurately.
2. Whole open avenue of research – try to posit what is the utility function
(fairness, altruism, image, reciprocity….) and design experiments to try to
distinguish and refine behavioral motivation (i.e., the utility function)
3. Potentially multiple utility functions? Idea that we have mental compartments
and use different approaches for different problems

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a. Fehr and Schmitt results that people play differently in one-on-one
interactions games (e.g., ultimatum, bargaining) versus market games.
Cooperation in small numbers interactions and competitive in more
anonymous large number situations
b. Another reason that institutional arrangements matter – may directly affect
the behavior of the individuals involved.

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