The basic idea behind social value orientation (SVO) is to gain a snapshot of someone's social preferences. Are they selfish and simply do the best for themselves without caring about the payoff of others? Are they competitive and want to earn more than others (even if that means sacrificing own payoff)? Are they inequality averse and want to earn the same as others? Or are they pro-social and want to maximize the payoff of others? SVO is a tool most closely associated with social psychology, but there is no doubt that it has a useful role to play in economics.
A contribution that should be particularly interesting to economists is a recent meta-analysis published in the European Journal of Personality by Jan Luca Pletzer and co-authors. The analysis provides evidence on the connection between SVO, beliefs and behavior, which could feed into debates around reciprocity and psychological game theory. But I'm not going to talk about that study yet. Instead, I will do a couple of posts in which I explain different ways to measure SVO. Then I can get to the heart of why SVO can be useful for economists.
A contribution that should be particularly interesting to economists is a recent meta-analysis published in the European Journal of Personality by Jan Luca Pletzer and co-authors. The analysis provides evidence on the connection between SVO, beliefs and behavior, which could feed into debates around reciprocity and psychological game theory. But I'm not going to talk about that study yet. Instead, I will do a couple of posts in which I explain different ways to measure SVO. Then I can get to the heart of why SVO can be useful for economists.
The first economics study I know of that used SVO was published in 1996 by Theo Offerman, Jeop Sonnemans and Arthur Schram in the Economic Journal. There are many ways to elicit SVO. Here I will look in some detail at the approach they used, which is called the decomposed game technique or ring technique. To get us started consider the 24 different allocations in the table below. For instance, allocation a means $0 for yourself and $15 for some other person that you are matched with. Option b means $3.9 for yourself and $14.5 for the the other person, and so on. These 24 allocations neatly fit around a circle varying from a lot for both of you (allocation d) to not much for either of you (allocation p).
To elicit SVO subjects are given 24 decision tasks in which they need to choose between pairs of allocations from the circle. Specifically, they are asked if they would prefer allocation a or b, then if they would prefer b or c, then c or d, and so on, all around the circle. The slightly tricky thing is then converting those 24 choices into a measure of SVO. Here different studies take different approaches. The approach Offerman and co-authors take is to use the observed motivational vector. This works by adding up the total amount given to self and total amount given to other (over the 24 choices). From that we get a vector in the circle. The direction of that vector is used to measure value orientation.
The table below works through two examples. First we have an individualistic person who simply chooses whichever choice maximizes his own payoff. If you add up all his payoffs he overall gives 30 to himself and 0 to the other person. The angle this makes relative to the horizontal is 0 degrees. Next we have a cooperative person who makes 6 different choices, highlighted in yellow. In these 6 choices the individual sacrifices a little of his own payoff to the benefit of the other person. Ultimately both him and the other person end up with a total payoff of 21.2. This more pro-social behavior means the motivational vector is 45 degrees to the horizontal.
Having worked out the angle of the observed motivational vector we can then classify SVO. (To work out the angle we need a bit of high school trigonometry, using arctan(other/self).) The figure below summarizes the classification. Anyone with a vector between -22.5 and 22.5 degrees is classified as individualistic - they care mainly about self. Anyone between 22.5 and 67.5 is classified as cooperative - these are somewhat pro-social towards others. While there are five categories in all it is individualistic and cooperative that matter most. For example, in the study by Offerman and co-authors, 65% of subjects were individualistic and 27% were cooperative. This split is fairly typical.
As I have already said, the method described above is only one of many ways to elicit SVO. But it is a relatively easy method for economists to use. And actually gives you two measures: the angle of the observed motivational vector allows you to classify SVO while the length of the vector gives you a measure of consistency of choice. The longer the vector the more consistent is the person to their classified SVO. Indeed, you sometimes find subjects who overall give 0 to themselves and 0 to the other person which suggests their choices are simply random.
So what to do with the SVO once you have it? I will come back to the issue looked at by Offerman and co-authors in a later post. Here I will look at a slightly simpler issue considered by Eun-Soo Park and published in the Journal of Economic Behavior and Organization. Park looks at framing effects in public good games and the tendency for contributions to be higher in a positive frame - contribute and it benefits the group - than a negative frame - keep for yourself and it harms the group. By measuring SVO using the decomposed game technique Park finds that the framing effect is driven by individualistic types. The figure below illustrates how stark the effect was. With cooperative types there is no sign of any framing effect, but for individualistic types the effect is large. That finding can potentially give us important clues as to why we observe a framing effect. In particular, it suggests that selfish people can be induced to cooperate given the right frame.
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