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Social Choice and Welfare

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02-11-2017 | Original Paper

Inequality and inter-group conflicts: experimental evidence

Authors: Klaus Abbink, David Masclet, Daniel Mirza

Published in: Social Choice and Welfare | Issue 3/2018

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Abstract

In this paper we experimentally investigate the relationship between inequality and conflicts, the latter taking the shape of rebellious actions. Further, our conflict experiment allows us to study whether lack of coordination or fear of retaliation may refrain individuals from rioting despite their willingness to riot. Our conflict game consists of two-stages. In a first stage, subjects play a proportional rent-seeking game to share a prize. In a second stage, players can coordinate with the other members of their group to reduce (“burn”) the other group members’ payoffs. Our treatments differ in the extent of inequality. Precisely, in the first series of treatments (called symmetric treatments), inequality only arises from different investment behaviors of players in the first stage. In a second series of treatments (called asymmetric treatments), inequality is strongly reinforced by attributing to some subjects (the advantaged group) a larger share of the price than other subjects (the disadvantaged group) for the same amount of effort. While the former refer to inequality of effort the latter is related to exogenous inequality of circumstances (bad luck). We ran these treatments under both partner and stranger matching protocol. Consistent with the assumption of inequality aversion, we observe that disadvantaged groups “burn” significantly more money than advantaged groups in the asymmetric treatment. However, we also observe that the relationship between inequality and conflicts is non-linear since the frequency of conflicts is significantly higher in the symmetric treatment where inequality is moderate compared to the asymmetric treatment where inequality is extreme. Resignation seems to be the main driving force behind this phenomenon. Our findings also shed light on the important role played by coordination.

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See Cramer (2005) for the lineage of this idea from Aristotle and Plato through Montaigne and de Tocqueville to today’s academic debate.

Some have found positive relationships between income inequality and political violence (Muller and Seligson 1987; Midlarsky 1988; Brockett 1992; Binswanger et al. 1993; Alesina and Perotti 1996 provide examples). Others have found a negative relationship (Parvin 1973). Some researchers have tried to solve these apparent contradictions by suggesting a concave (inverted U-shaped) relationship. Political violence would occur most frequently at intermediate levels of economic inequality, less frequently at very low or very high levels. In a different setting, Robinson (2001) predicts this counter intuitive finding that ethnic conflict could be worse when the groups that engage in conflicts have roughly equal resources.

However, this literature recognizes that efforts themselves might well be endogenous too to exogenous circumstances. For instance, agents that are discriminated upon, say in the labour market, might not be incited to make efforts to find a job, if they think that it is not worthwhile.

Orthodox economic theory has long denied humans the desire to harm others without own benefit, but recent behavioural findings suggest that such a tendency does exist. Most of the behavioural economists have traditionally focused on situations in which humans are nicer than orthodox theory suggests, i.e. altruistic, fairness-driven, or reciprocal. The dark side of economic behaviour is only sparsely studied.

In a first treatment called full information, players are informed about their partner’s decision. In a second treatment, players can not exactly identify the partner’s action because a part of endowment can also be randomly destructed by Nature.

In our setting conflicts are costly with no monetary benefits although conflicts become less costly if all group members coordinate to engage together in conflict. We thank an anonymous reviewer for this remark.

It has been often argued that key feature of the mobile phones, particularly its flexibility and hyper-coordination helped coordination for collective expression.

In China, where political demonstrations are risky for participants, the New York Time reported that twelve thousand workers simultaneously went on strike in Shenzhen at the factory of a supplier of Wall Mart. The article mentions that coordination among the rioters was growing through the sending of coded messages to each other by cellphones (French 2004; Rheingold 2008). The New York Times also reported that mobile phones and web sites once again played a central role in the anti-Japanese demonstrations that broke out in several Chinese cities in April 2005. Neumayer and Stald (2013) shed light on the role of information provision through mobile communication in mass street protest based on two case studies the civic outrage of young people concerning the destruction of a youth centre in Copenhagen, Denmark in 2006 and the use of mobile phones in antifascist protests in Dresden, Germany in 2011. In the French case, the trigger for the French riots in fall 2005 was the accidental electrocution of two immigrant youths. It was claimed that these teenagers died while they were chased by the police, a charge the authorities denied. Tragic as this case was, it would usually not be sufficient as a cause of a rebellion of that scale. However, it served as a coordination device.

A few studies have documented the positive aspects of inter group competition to mitigate the free-riding problem within, teams (i.e. Bornstein 1992; Erev et al. 1993; Tan and Bolle 2007).

Following the terminology introduced in Roemer (1998), we refer to the former determinants as “circumstances”, which are exogenous to the person, such as family background while the latter factors correspond to “efforts” which can be influenced by the individual.

Esses et al. (1998) showed that competition for resources increases negative attitudes towards immigrants.

Hence, peer effects are modelled here in an induced value way by which the minority would follow the majority unless, otherwise, they accept to loose payoff. Breitmoser et al. (2014) model peer effects as induced value although without considering a coordination game.

Evidence for the effects of instruction framing has been very mixed so far (Baldry 1986; Alm et al. 1992; Burnham et al. 2000; Abbink and Hennig-Schmidt 2006; Abbink and Brandts 2009).

Previous rent-seeking experiments have shown investments that are systematically above equilibrium levels. This possibility is excluded through our imposed restriction of the strategy space. In this study we are not interested in the behavioural properties of the rent-seeking game, but we rather use the game as a device to induce inequality of opportunities to study their effect on behaviour at the second stage. For that, it is actually desirable if subjects predictably reach the upper bound of the range, as it improves the comparability of observations.

These deliberations turned out to be empirically irrelevant, as in the experiment the focal equilibrium investment was reached very quickly (see next section).

Cooper et al. (1992) found, for instance, that subjects converge on the inefficient equilibrium when people interact with different opponents at each round. A reason generally evoked is that players are uncertain about which strategy will be played and favor the safe strategy (strategic uncertainty). Note that in our experiment, subjects are always matched with the same players within their group.

In this current study, we do not aim at disentangling these dimensions.

Indeed a very appealing hypothesis about distributional preference is inequality aversion (see Loewenstein et al. 1989; Fehr and Schmidt 1999; Bolton and Ockenfels 2000; Charness and Rabin 2002; Falk et al. 2005). These approaches assume that individual utility depends not only on one’s own payoff but also on the equality of the income distribution.

We define a rioter here as someone who takes part in a brawl or a violent disturbance.

Other previous studies have investigated subjects’ reaction to the information on the opponents’ types. Some studies have also attempted to test whether subjects do act according to their stated beliefs or whether beliefs could be elicited without altering subjects’ behavior but empirical evidence is mixed. These studies are related to the growing literature on the level-k model that was developed in the recent two decades (see Crawford et al. 2013 for a detailed survey). In this current study we did not elicited beliefs. Testing how beliefs influence coordination is left for future research. For instance, using the strategy method may be a solution to isolate motives to riot induced by social preferences and those induced by expectations of others’ decisions.

There is no significant difference between first-stage payoffs for groups A and D in the sym treatments, suggesting the absence of framing effects.

In the statistical results of the tests reported here, the unit of observation is the session for the stranger treatments.

In additional estimates (available upon request) we checked whether D groups were more likely to fully coordinate (B,B,B) than the advantaged. For this purpose we ran an estimate at the group level on the probability that the group fully coordinates (BBBB). The dummy variable associated to the disadvantaged group captures a positive and highly significant coefficient indicating that D groups are more likely to fully coordinate on riots.

It is positive albeit non statistically significant in the partner symmetric treatment, however.

We thank an anonymous reviewer for this helpful remark.

This approach is considered by the realistic conflict theory. It is also depicted in the typology of conflicts proposed by Katz (1965). Katz (1965) and more recently Fisher (2000) distinguish three main sources of conflicts, among which two sources rely on competition: economic conflicts that involve competition over scarce resources; Power conflicts that occur in case of competition for social domination. The last source of conflict is Value conflict that relies on disagreement between groups’ beliefs or lifestyles. Value conflicts are deliberately excluded from the analysis here. In the words of Fisher (2000), “groups not only fight over material goods but also for social status: each group seeks to maximize its domination in the relationship with the other. In other words, no one wants to be at the bottom, those at the bottom want to move up, while those at the top want to stay at the top.” This is also consistent with existing literature on patent racing. Indeed patent competition often has several of the characteristics of a race in which the largest prize is awarded to the first firm to make an industrial breakthrough that captures the largest share of industry profit (Grossman and Shapiro 1987) According to Shaver (2012) patent racing may sometime looks like a war. Shaver (2012) proposed a new model of “patent warfare” in which competing parties assemble strategic assets, then turn to battle their rivals for world domination.

In a related money burning experiment, Abbink et al. (2011) conducted a simple money-burning experiment in which the decider endowed with 50 tokens had to decide whether or not to reduce another person’s payoff at an own cost. The authors varied across tasks the endowment of the victim from 50 (the case in which there is no inequality) to 600, a case of extreme disadvantageous inequality. They observe that equal distributions (50,50) are particularly prone to destruction. Indeed the authors find that destruction rates are significantly higher in task (50,50) than in any of the other tasks. Charness and Grosskopf (2001) also observed evidence for desire for dominance. In one allocation task in Charness and Grosskopf (2001), a person could choose any amount between 300 and 1200 for the other person while receiving 600 for herself regardless of her choice. The authors find that a high number of people chose to allocate less than 600. One particularly eloquent example was the individual who chose 599 for the paired participant. Charness et al. (2011) investigate individuals’ investment in status in an environment where no monetary return can possibly be derived from reaching a better relative position. The authors find that even when wages are fixed, some people are willing to pay for status improvement without any instrumental monetary considerations, sacrificing money to potentially improve their rank. The authors also observe that individuals are more willing to do so when their performance is close to that of others, either to reach the highest rank or to avoid the lowest one. Consequently desire for dominance would be more likely to induce destruction for payoff distribution in which the payoffs across individuals (or groups) are close (Abbink et al. 2011).

We thank an anonymous referee for this helpful remark.

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Title: Inequality and inter-group conflicts: experimental evidence
Authors: Klaus Abbink
David Masclet
Daniel Mirza
Publication date: 02-11-2017
Publisher: Springer Berlin Heidelberg
Published in: Social Choice and Welfare / Issue 3/2018
Print ISSN: 0176-1714
Electronic ISSN: 1432-217X
DOI: https://doi.org/10.1007/s00355-017-1089-x

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