Aron Szekely (Inst of Cognitive Sciences & Technologies)

This week's seminar will be given by Aron Szekely from the Institute of Cognitive Sciences and Technologies, Italy. 

Title: Groups and their Reputations: An Experiment on the Formation and Maintenance of an Intimidating Group Reputation  

Abstract:
Groups, like individuals, possess and create reputations that can be used by others when deciding how to treat that group and its members. Building a valuable group reputation, and preventing it from being destroyed, has wide-reaching effects in conflict, cooperation, and exchange situations. Notwithstanding its economic and social relevance, however, theory and experimental work is sparse. We argue, and experimentally test, that group reputations can be considered as a particular kind of public good: one that is intangible—it emerges from beliefs shared by non-members—and noisy—it is difficult to precisely know what level of the good exists. Using an experiment based on an ‘entry game’, in which a first-mover entrant decides whether to join a market and a second mover decides whether to undertake costly retaliatory action or to leave the entrant be in case of entry, we explore and contrast group reputation with individual-level reputation. Consistent with our hypotheses, we find that entrants consider both individual and group reputation when deciding how to behave, and, if within-group punishment is possible, groups can create a reputation that deters entry. However, in absence of this mechanism, group contribution falls, the public good of their reputation is undermined, and entrants are not deterred. Our results reinforce intuition that mechanisms for encouraging contributing actions by group members’ actions are crucial and that without such mechanisms the ability of group members to attain beneficial outcomes diminishes.