What is the Nature of Social Norm within the Context of In-Group Favouritism?

In this paper, we use the ‘favour game’ as developed in Harris et al (2009) to examine the nature of social norms regarding in-group favouritism behaviour. In the favour game, a decision-maker has to decide only once how to allocate a fixed amount of resource between each of the three members of her own group and each of the three members of the out-group, whilst the decision-maker’s own payoff is not affected by her decision. In this paper, we extend the game by exploring three treatments: in the first treatment, only the members of the in-group can punish the decision-maker. In the second treatment, only the members of the out-group can punish the decision-maker. Finally, in the third treatment, only an independent third-party observer can punish the decision-maker. The aim of these treatments is to test whether there is a prevailing social norm which dominates the behavioural standard within the context of in-group favouritism and whether this mechanism varies across different subject pools, namely Thailand and the UK. Compared to a baseline treatment with no punishment opportunity, we observed that among the Thai subjects in-group favouritism significantly increased once the in-group members were given the opportunity to punish the decision-maker. The threat of punishment from a third-party punisher also increased in-group favouritism in Thailand. However, when only the out-group members had the opportunity to punish, no change in in-group favouritism behaviour was observed. On the contrary, within the British subject pool, when the out-group members had the opportunity to punish the decision-maker, we observed a decline in in-group favouritism as well as a marked shift towards an equitable outcome. The threats of punishments from the in-group members and the third-party, on the other hand, did not have any impact on in-group favouritism behaviour in the UK. The results suggest that within the Thai subject pool, there appears to be a prevailing ‘in-group bias norm’ which is strongly enforced within and outside the group. Within the UK subject pool, however, it is less clear what the prevailing norm is within the context of favouritism. JEL classification: D73, C92