Does Generosity Generate Generosity? An Experimental Study of Reputation Effects in a Dictator Game

Abstract

This paper explores how information about paired subject's previous action affects one's own behavior in a dictator game. The first experiment puts dictators in two environments where they can either give money to the paired player or take money away from them: one where the recipient is a stranger and the other where the dictator has information on the recipient's reputation. Contrary to anecdotal evidence, the statistical tests show that the dictator's behavior toward a stranger is not statistically significantly different from their behavior toward an individual with an established reputation. The findings arise because a high proportion of dictators acted purely in their own self interest in both treatments. In the second experiment the dictators' choices were restricted to only generous actions. In such environment the dictators sent more money on average to recipients with a reputation for being generous than to recipients without a reputation.