Running Head: HEURISTICS FOR SOCIAL INTERACTIONS Heuristics for Social Interactions: How to Generate Trust and Fairness

We study a bargaining situation—an indefinitely repeated investment game in which Player A decides how much of an endowment he wants to invest whereas Player B decides how much of the then tripled investment she wants to return. In two studies, we show that participants in the role of Player A make substantial investments (“trust”), those in the role of Player B return substantial parts of the money (“reciprocity”) and both players act so that equal payoffs (“fairness”) are possible. We test models of the underlying mechanisms of this behavior, and find that social heuristics can predict participants’ choices substantially better than a reinforcement learning model and a baseline model. These heuristics explicate the underlying principles of what is commonly called trust, reciprocity and fairness. Heuristics for Social Interactions . 4 Trust is a major component of our social life. The relationship between an employee and employer, or between a patient and a doctor, heavily relies on trust. If you are an employee, you often depend on your employer. You may have frequently worked overtime trusting that your effort will be reciprocated accordingly in a higher and fair wage. This example of everyday life illustrates the central topics of the present article: Trust, reciprocity, and fairness. The main goals of the present article are twofold. The first goal is to demonstrate how a motivation for trust, reciprocity, and fairness influences decision-making in an “investment game” that involves ongoing social interaction (Study 1). Second, we analyze the underlying social heuristics or decision strategies that establish trust, reciprocity, and fair outcomes (Study 2). We agree with Bugental (2000) that people use different “social algorithms”—if-then contingencies—to solve the social problems they are faced with. Bugental (2000) and similarly (Cosmides & Tooby, 1992) and Fiske (1992) take a broad perspective and give only rather vague descriptions of these algorithms. In contrast, in the present article we will provide precise heuristics with specific characteristics that model the decision process in a particular social interaction. We define heuristics as a sequence of goal-oriented operations for solving a problem efficiently. We first describe the investment game, which will be used as a model for the asymmetrical social interaction we are interested in. Then we describe Study 1 in which the influence of trust, reciprocity and fairness was investigated. In Study 2 a new technique for analyzing participants’ decision processes will be introduced. Heuristics as models of the decision processes are proposed and their fit is compared to other models, in particular to a learning model. Heuristics for Social Interactions . 5 Social Intelligence: Trust, Reciprocity and Fairness Investment Game What are distinguishing characteristics of a relationship between an employee and employer? The interaction consists of two individuals; it is possibly ongoing; decisions are often made sequentially and the relationship is asymmetrical. How can such social asymmetric relationship be described in a game-theoretical notion? For instance, due to its symmetrical payoff structure and the simultaneous decision process, the prisoner’s dilemma (Luce & Raiffa, 1957) would be an improper description. Instead, such a dependency relationship between two individuals resembles the situation of an investment game (Berg, Dickhaut, & McCabe, 1995). The investment game is a two-person sequential bargaining game (see Figure 1). Both players receive an endowment of, for instance, $10. Player A can invest any amount of the endowment, which is then augmented, producing some surplus before it is delivered to Player B. Player B decides how much of the then tripled amount she wishes to return to Player A.