The Puzzle of Social Preferences

We present a brief overview of the experimental economics literature on social preferences. In numerous experiments, economically incentivized subjects are willing to sacrifice part of their material earnings to compensate the kind behavior of others, or will be willing to reciprocate at a non-negligible cost, or even pay a positive price for punishing the behavior of selfish individuals. All these actions are labeled as social in economics because there is no apparent way to reconcile them with any reasonable form of pure self-interest. We focus on social dilemma games and want to communicate two main messages. First, research in experimental economics has produced abundant evidence that illustrates the social components of people’s preferences. Second, social sanctions of different types play an important role in facilitating cooperative behavior.