Strategic Uncertainty and Social Identity

• In Event: Behavioral Political Economy: Identity

Abstract

We present a model and experimental evidence to address the relationship between social identity and strategic uncertainty. In the setting we analyze, players face the stag-hunt incentives, which create a divergence between payoff-dominant and risk-dominant equilibrium choices. We show that (1) players who share a social identity are more likely to play the payoff-dominant equilibrium, and players who do not share a social identity the risk-dominant equilibrium; (2) willingness to play payoff-dominant equilibrium actions is decreasing in the size of the group, holding fixed the identity-match; (3) variation in pre-game experience with the identity group influences subjects' choices in the strategic interaction; and (4) players in identity-heterogeneous groups are more likely to convergence to the payoff-dominant equilibrium when they face a lower group threshold for coordination on the payoff-dominant actions; We use these results to shed light on several important findings on group identity effects in the literature, including the negative effect of group heterogeneity on the provision of public goods and identity-contingent behavior affect described in both lab-in-the-field experiments and in observational comparative studies. We further argue that results point to a novel policy approach to improve the provision of public goods in settings with identity heterogeneity.

Authors

• Dominik Duell, University of Innsbruck

• Catherine Hafer, New York University

• Dimitri Landa, NYU