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Draft:Behavioral Economics and Personality

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Behavioral Economics Research

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Earlier iterations of economic research perceived that individuals are rational and selfish actors, believing that they will prioritize picking choices that give themselves the most monetary/selfish utility [1] [2]. This type of thought or belief was known to be “homo economicus” or economic man. However, economic researchers such as Kahneman and Tversky argued against this thought, stating that people often act irrationally due to the presence of psychological biases, heuristics, and social desirability concerns [3]. One of the more influential theories brought through Kahneman and Tversky was “Prospect Theory”, where found evidence of a) loss aversion (people generally feel losses twice as much as gains), b) “non-linear probability weighting” (where individuals appreciate small chances of gains yet fear small chances of losses), and c) dimishing utility on increasing returns (the more the gain (loss) is from it’s original value, the smaller the increase (decrease) of utility is perceived) [4] [5]. Since then, many other findings and biases from other authors have been studied and discovered through this argument against “homo economicus” thought.

Game Theory

This research usually involves experiments involving participants engaging in specific tasks or decisions that involve other participants. These participants can be thought of as “players” and the tasks can be thought of as a “game”. Therefore, the concept of “game theory” came about through this emphasis on game-like experiments. This resulted in creating different “games” between individuals that emphasize or measure different preferences. For example, the dictator game measures social preference, the prisoner's dilemma measures trust, and the stag hunt relies on cooperation/trust [6] [7] [8]

Behavioral Economic Games

These games are observed almost exclusively in experimental methods due to the focus on individual behavior. Research methods such as archival and correlational/regression-based research focus more on aggregate behavior (e.g. groups of people, a firm, or countries). Qualitative methods (interviews/observational) data are more concerned with directly observing real-world phenomena, so utilizing game theory may not be very useful in this method. In the end, observing this “irrationality” within participants and even being able to claim causality with results.

While there are standard rules for behavioral economic games, the rules of these games may be modified to measure certain constructs better. For example, one experimental econ game, The Dictator Game, can be played traditionally where one participant (the Dictator) is randomly assigned the responsibility of splitting a pot of resources among themselves and another participant (the Responder). Typically, the Responder is forced to receive the resources being given. However, if experimenters would like to add a realistic fear of “rebellion” in unfair resource allocation, they can allow the Responder to have the option of rejecting the resources offered to them. Additionally, this would destroy the entire resource pool, causing some pressure for the Dictator to offer an appropriate amount of resources to the Responder now. When experimenters make this adjustment of rules, it is coined as “The Ultimatum Game” [9] [10].

Additionally, experimenters may choose to "add" different dimensions to the games instead of “changing” dimensions. For example, Hoffman et al. 1994 wanted to observe “entitlement” behavior with competition victors. Instead of randomly assigning the Dictator role, the experimenters had participants compete in a trivia quiz in order to “earn” the role of the Dictator. They found that individuals who won the trivia quiz before allocating resources would usually be more selfish in resource dispersion [11] [12].

Personality Research

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While a common interest of behavioral economic researchers is moderating these experiments across different external contexts/scenarios (e.g. testing if Dictators are more benevolent towards friends or with larger group sizes), experimenters can also moderate their experiments with “internal” context (e.g., how do narcissists and non-narcissists share resources). There has been an extensive stream of research teasing out and observing individual differences within people. In earlier personality research, researchers saw that individuals do have differences in their personalities. This was discovered primarily by having individuals answer questions in the Big-5 taxonomy [13]. This taxonomy consists of gauging an individual’s “five big” personality domains, which are: “extraversion (assertive and gregarious versus introverted), agreeableness (warm and kind versus cruel), conscientiousness (industriousness and responsible versus undependable), emotional stability (calm and serene versus anxious), and openness to experience (intellectual and creative versus close-minded)” [14].

Additionally, while personality researchers were able to observe personality differences, these differences were thought to be relatively innate and stable. However, due to the more recent surge of longitudinal studies and technology, it is much more apparent that individuals can experience “personality change”. These changes can occur from environmental cues (e.g. college and work experiences) or through the natural course of life (e.g. becoming more extraverted as you get older) [15] [16] [17][18]. Since researchers found that personality can be adaptive, there has been extensive research on what experiences or factors change people. Collectively, personality research has been a fruitful field that has looked at many angles of personality within people internationally.

Methods of Observing Personality Differences

While these personality dimensions have been collected primarily through self-ratings (e.g. participants directly assessing themselves on different scenarios/statements that assess their personality), other methods have been used. Some examples are third party perceptions of another’s personality (e.g. another person rating the participant on different personality dimensions), coding personality themes from a participant’s open-ended responses (e.g. teasing out how “consciousness” one’s summary is to scenario given), and even behavioral observations tracked through devices (e.g. frequency of visiting different locations) [19] [20] [21]. Additionally, other personality models and dimensions have been considered as well, such as the HEXACO model (essentially the Big-5 model but with an additional dimension of “unethical” behavior) and the numerous Dark Triad models (measuring three the “sinister” dimensions of personality that compromise Machiavellianism, narcissism, and psychopathy) [22] [23] [24]

Exploring Behavioral Economic and Personality Research

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HEXACO and Honesty-Humility

The Honesty-Humility personality factor stems from the HEXACO personality model, which is essentially a model that argues the Big-5 doesn’t capture a valid 6th personality factor (Honesty-Humility) [25] [26]. While the Big-5 remains the primary personality model of personality psychology, the HEXACO model has remained to be a pretty robust model.

Prisoners' Dilemma and HEXACO

Zettler et al. (2013) bring the dispositional “honesty-humility” within individuals to the “Prisoners' Dilemma” game. The Prisoners' Dilemma is usually played with two players. These two participants are usually told they are both being interrogated and can choose either to "rat" the other prisoner/player out or remain silent about the other prisoner. Collectively, the best option is for both players to remain silent since they would collectively get the least jail time. However, the best option is for the individual is to "defect" and rat the other prisoner while the other prisoner chooses to remain silent. Another layer of uncertainty among prisoners is the usual condition of no communication among players, so the players must anticipate the other player's motives and interests. This game is used to measure trust and social preferences, so it can be used to simulate situations such as partnerships, political alliances, or even tax policy [27].

Example of the Payoff's of the Prisoners' Dilemma

Zettler et al. (2013) began their experiment by recruiting 134 individuals via mailing list. These participants answered 16 items out of the German version of the 100-item HEXACO-PI-R [28] [29]. Then, the participants were instructed to play the Prisoners' Dilemma game three times, each with a random stranger. Each of the three times had a low, medium, and high "cooperative index" (CI), implying that a low CI payoff matrix had more incentive to "defect" while a higher CI payoff matrix had less incentive to "defect".

The results showed that one's cooperation increased with a low CI game when their Honesty-Humility score was higher. The higher CI condition had individuals with various Honesty-Humility scores who generally cooperate. The authors did another experiment, giving participants a 40% and 60% likelihood of their other partner defecting. They found that individuals with a higher Honesty-Humility score will strategically defect only when the probability of partner defection is high, while individuals with a lower Honesty-Humility score will try to defect regardless of the partner defection being high or low.


Public Goods Games and HEXACO

Hilbig et al. (2012) introduce the consideration of the “Public Goods” game and dispositional “honesty-humility” within individuals. A “Public Goods” game is quite similar to the prisoner's dilemma in terms of the option of cooperating and defecting and measuring social preference. However, the game is played with slightly different rules than the prisoner's dilemma. This game usually has groups larger than 2 individuals and allows the players to either contribute to a communal pot or not contribute to the communal pot. Usually, this pot allows all contributed resources to be multiplied by a larger number. Therefore, as a group, players should contribute the maximum of resources to get the maximum output of the multiplying pot. However, a rational or selfish individual would not contribute any resources and "freeload" off the communal resources of others. Some examples of the public goods game can be thought of as group efforts that allow freeloaders, such as initiatives to recycle, taxpayers, or simply group projects [30].

Public Goods Game Example

Hilbig et al. (2012) utilized the Public Goods game and HEXACO inventory, particularly the German 104-item version [31][32]. Then, participants were given the rules of the Public Goods game. This iteration had each player be given 100 dollars, be placed in groups of 5, and the pot to have a multiplication factor of 1.5. Some added rules were implemented, such as having visibility of contributions made, being able to allocate points to specifically punish free loaders, and doing a scenario-based second round with "different" strangers [33] [34].

The results of this experiment showed that contributions in the Public Goods game were significantly associated with the participants' individual Honesty-Humility scores. There was also a second experiment done in the same study with a larger sample and adding a "time lag" of assessing the individual's Honesty-Humility scores. Similar results were found in this more "robust" experiment.

Dictator Games and HEXACO

Hilbig et al. (2015) consider the implications of using the Dictator Game and the disposition of “honesty-humility”. For an overview of the Dictator Game, please refer to the earlier section of "Behavioral Economic Games".

The authors did their study in two parts. The first part included assessing the "Dictators'" personality and behavior. The personality was measured using the German version of the 6-item HEXACO-PI-R and German NEO-FFI [35] [36] [37]. Then, these participants were given an envelope of 5 euros. The participants were instructed that they may keep as much money as they want, but the remainder would go to another participant. This is a "double blind" Dictator Game, meaning that the Dictator and Responder will be anonymous from each other. The split of resources is the dictator's behavior.

The second part involved a different set of participants; these are the "Responders" of the Dictator Game. These participants were given the envelopes of remaining money and were asked to guess how much money would be in the envelopes. Then, the participants would discover the contents of the envelopes and assess how fair the allocation was on a 5-point Likert scale. Finally, these participants also answered items from the HEXACO observer report form to assess their respective Dictator's personality.

The results of this experiment found that allocations were generally thought to be fair if they were large or if the responder anticipated the allocation to be low. here was a significant result showing that the fairness judgements were strongly related to the self-reported honesty-humility scores of the dictators. In other words, if the dictator were more dishonest/humble, their offer would be more likely to be perceived as unfair.

References

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  1. ^ Persky, Joseph. "Retrospectives: The Ethology of Homo economicus." The Journal of Economic Perspectives, Vol. 9, No. 2 (Spring, 1995), pp. 221–231
  2. ^ Rittenberg and Tregarthen. "Chapter 6" (PDF). Principles of Microeconomics. p. 2. Retrieved June 20, 2012<
  3. ^ Camerer, Colin; Loewenstein, George; Rabin, Matthew (2004). Advances in Behavioral Economics. Princeton University Press. pp. 4–6
  4. ^ Kahneman, Daniel; Tversky, Amos (1979). "Prospect Theory: An Analysis of Decision under Risk" (PDF). Econometrica. 47 (2): 263–291. CiteSeerX 10.1.1.407.1910. doi:10.2307/1914185. ISSN 0012-9682. JSTOR 1914185.
  5. ^ Kahneman, Daniel; Diener, Ed (2003). Well-being: the foundations of hedonic psychology. Russell Sage Foundation.
  6. ^ Camerer, C. F. (2011). Behavioral game theory: Experiments in strategic interaction. Princeton university press.
  7. ^ Güth, W., Schmittberger, R., & Schwarze, B. (1982). An experimental analysis of ultimatum bargaining. Journal of economic behavior & organization, 3(4), 367-388.
  8. ^ Harsanyi, J. C., & Selten, R. (1988). A general theory of equilibrium selection in games. MIT Press Books, 1
  9. ^ Camerer, C. F. (2011). Behavioral game theory: Experiments in strategic interaction. Princeton university press.
  10. ^ Güth, W., Schmittberger, R., & Schwarze, B. (1982). An experimental analysis of ultimatum bargaining. Journal of economic behavior & organization, 3(4), 367-388.
  11. ^ Camerer, C. F. (2011). Behavioral game theory: Experiments in strategic interaction. Princeton university press.
  12. ^ Hoffman, E., McCabe, K., Shachat, K., & Smith, V. (1994). Preferences, property rights, and anonymity in bargaining games. Games and Economic behavior, 7(3), 346-380.
  13. ^ Goldberg LR. 1993. The structure of phenotypic personality traits. Am. Psychol. 48(1):26-34
  14. ^ Roberts, B. W., & Yoon, H. J. (2022). Personality psychology. Annual review of psychology, 73(1), 489-516
  15. ^ Roberts, B. W., Caspi, A., & Moffitt, T. E. (2003). Work experiences and personality development in young adulthood. Journal of Personality and Social Psychology, 84(3), 582–593. https://doi.org/10.1037/0022-3514.84.3.582
  16. ^ Ringwald, Whitney R., Aleksandra Kaurin, Katherine M. Lawson, Aidan G. C. Wright, and Richard W. Robins. 2024. "The Development of personality—From Metatraits to facets—Across Adolescence and into Adulthood in a Sample of Mexican-Origin Youth." Journal of Personality and Social Psychology 126 (6) (06): 1140-1160. doi:https://doi.org/10.1037/pspp0000487. https://www.proquest.com/scholarly-journals/development-personality-metatraits-facets-across/docview/2872992482/se-2
  17. ^ Wrzus, C., Quintus, M., & Egloff, B. (2023). Age and context effects in personality development: A multimethod perspective. Psychology and aging, 38(1), 1.
  18. ^ Bleidorn W, Hopwood CJ, Lucas RE. Life Events and Personality Trait Change. J Pers. 2018 Feb;86(1):83-96. doi: 10.1111/jopy.12286. Epub 2016 Dec 3. PMID: 27716921.
  19. ^ Cutler, Andrew and David M. Condon. 2023. "Deep Lexical Hypothesis: Identifying Personality Structure in Natural Language." Journal of Personality and Social Psychology 125 (1) (07): 173-197. doi:https://doi.org/10.1037/pspp0000443. https://www.proquest.com/scholarly-journals/deep-lexical-hypothesis-identifying-personality/docview/2737187998/se-2Links to an external site..
  20. ^ Hampson, S. E. and Edmonds, G. W. (2017). A new twist on old questions: a life span approach to the trait concept. Journal of Personality, 86(1), 97-108.Links to an external site. https://doi.org/10.1111/jopy.12304Links to an external site.
  21. ^ Matz, S. C., & Harari, G. M. (2021). Personality–place transactions: Mapping the relationships between Big Five personality traits, states, and daily places. Journal of Personality and Social Psychology, 120(5), 1367.
  22. ^ Ashton M. C., & Lee K. (2007). Empirical, theoretical, and practical advantages of the HEXACO model of personality structure. Personality and Social Psychology Review, 11, 150–166. https://doi.org/10.1177/1088868306294907.
  23. ^ Ashton, M. C., & Lee, K. (2020). Objections to the HEXACO Model of Personality Structure—and why those Objections Fail. European Journal of Personality, 34(4), 492-510
  24. ^ Jones, D. N., & Paulhus, D. L. (2014). Introducing the Short Dark Triad (SD3): A brief measure of dark personality traits. Assessment, 21(1), 28–41. https://doi.org/10.1177/1073191113514105
  25. ^ Ashton M. C., & Lee K. (2007). Empirical, theoretical, and practical advantages of the HEXACO model of personality structure. Personality and Social Psychology Review, 11, 150–166. https://doi.org/10.1177/1088868306294907.
  26. ^ Ashton, M. C., & Lee, K. (2020). Objections to the HEXACO Model of Personality Structure—and why those Objections Fail. European Journal of Personality, 34(4), 492-510
  27. ^ Camerer, C. F. (2011). Behavioral game theory: Experiments in strategic interaction. Princeton university press.
  28. ^ Ashton, M. C., Lee, K., Perugini, M., Szarota, P., de Vries, R. E., Di Blas, L.,…De Raad, B. (2004). A six‐factor structure of personality‐descriptive adjectives: Solutions from psycholexical studies in seven languages. Journal of Personality and Social Psychology, 86, 356–366.
  29. ^ Ashton, M. C., Lee, K., De Vries, R. E., Perugini, M., Gnisci, A., & Sergi, I. (2006). The HEXACO model of personality structure and indigenous lexical personality dimensions in Italian, Dutch, and English. Journal of Research in Personality, 40, 851–875. http://dx.doi.org/10.1016/j.jrp. 2005.06.003.
  30. ^ Camerer, C. F. (2011). Behavioral game theory: Experiments in strategic interaction. Princeton university press.
  31. ^ Ashton, M. C., & Lee, K. (2008). The prediction of HonestyHumility‐related criteria by the HEXACO and Five‐Factor Models of personality. Journal of Research in Personality, 42, 1216–1228.
  32. ^ Ashton, M. C., Lee, K., Perugini, M., Szarota, P., de Vries, R. E., Di Blas, L.,…De Raad, B. (2004). A six‐factor structure of personality‐descriptive adjectives: Solutions from psycholexical studies in seven languages. Journal of Personality and Social Psychology, 86, 356–366.
  33. ^ Fehr, E., & Gächter, S. (2000). Cooperation and punishment in public goods experiments. TheAmericanEconomicReview, 90,980–994.
  34. ^ Nikiforakis, N., & Normann, H.‐T. (2008). A comparative statics analysis of punishment in public‐good experiments. Experimental Economics, 11, 358–369.
  35. ^ Moshagen, M., Hilbig, B. E., & Zettler, I. (2014). Faktorenstruktur, psychometrische Eigenschaften und Messinvarianz der deutschsprachigen Version des 60-item HEXACO Persönlichkeitsinventars. Diagnostica.
  36. ^ Ashton, Michael C., and Kibeom Lee. "The HEXACO–60: A short measure of the major dimensions of personality." Journal of personality assessment 91.4 (2009): 340-345.
  37. ^ Borkenau, P., & Ostendorf, F. (1993). NEO-Fünf-Faktoren-Inventar (NEO-FFI) Handanweisung. Göttingen: Hogrefe.


Ashton M. C., & Lee K. (2007). Empirical, theoretical, and practical advantages of the HEXACO model of personality structure. Personality and Social Psychology Review, 11, 150–166. https://doi.org/10.1177/1088868306294907.

Ashton, M. C., & Lee, K. (2008). The prediction of HonestyHumility‐related criteria by the HEXACO and Five‐Factor Models of personality. Journal of Research in Personality, 42, 1216–1228.

Ashton, M. C., & Lee, K. (2020). Objections to the HEXACO Model of Personality Structure—and why those Objections Fail. European Journal of Personality, 34(4), 492-510

Ashton, M. C., Lee, K., De Vries, R. E., Perugini, M., Gnisci, A., & Sergi, I. (2006). The HEXACO model of personality structure and indigenous lexical personality dimensions in Italian, Dutch, and English. Journal of Research in Personality, 40, 851–875. http://dx.doi.org/10.1016/j.jrp. 2005.06.003.

Ashton, M. C., Lee, K., Perugini, M., Szarota, P., de Vries, R. E., Di Blas, L.,…De Raad, B. (2004). A six‐factor structure of personality‐descriptive adjectives: Solutions from psycholexical studies in seven languages. Journal of Personality and Social Psychology, 86, 356–366.

Ashton, Michael C., and Kibeom Lee. "The HEXACO–60: A short measure of the major dimensions of personality." Journal of personality assessment 91.4 (2009): 340-345.

Bader, M., Hilbig, B. E., Zettler, I., & Moshagen, M. (2023). Rethinking aversive personality: Decomposing the Dark Triad traits into their common core and unique flavors. Journal of Personality, 91, 1084–1109.

Bleidorn W, Hopwood CJ, Lucas RE. Life Events and Personality Trait Change. J Pers. 2018 Feb;86(1):83-96. doi: 10.1111/jopy.12286. Epub 2016 Dec 3. PMID: 27716921.

Borkenau, P., & Ostendorf, F. (1993). NEO-Fünf-Faktoren-Inventar (NEO-FFI) Handanweisung. Göttingen: Hogrefe.

Camerer, C. F. (2011). Behavioral game theory: Experiments in strategic interaction. Princeton university press. Camerer, Colin; Loewenstein, George; Rabin, Matthew (2004). Advances in Behavioral Economics. Princeton University Press. pp. 4–6

Cutler, Andrew and David M. Condon. 2023. "Deep Lexical Hypothesis: Identifying Personality Structure in Natural Language." Journal of Personality and Social Psychology 125 (1) (07): 173-197. doi:https://doi.org/10.1037/pspp0000443. https://www.proquest.com/scholarly-journals/deep-lexical-hypothesis-identifying-personality/docview/2737187998/se-2Links to an external site..

Fehr, E., & Gächter, S. (2000). Cooperation and punishment in public goods experiments. TheAmericanEconomicReview, 90,980–994. Goldberg LR. 1993. The structure of phenotypic personality traits. Am. Psychol. 48(1):26-34

Güth, W., Schmittberger, R., & Schwarze, B. (1982). An experimental analysis of ultimatum bargaining. Journal of economic behavior & organization, 3(4), 367-388.

Hampson, S. E. and Edmonds, G. W. (2017). A new twist on old questions: a life span approach to the trait concept. Journal of Personality, 86(1), 97-108.Links to an external site. https://doi.org/10.1111/jopy.12304Links to an external site.

Harsanyi, J. C., & Selten, R. (1988). A general theory of equilibrium selection in games. MIT Press Books, 1

Hilbig, B. E., Thielmann, I., Hepp, J., Klein, S. A., & Zettler, I. (2015). From personality to altruistic behavior (and back): Evidence from a double-blind dictator game. Journal of Research in Personality, 55, 46-50.

Hilbig, B. E., Zettler, I., & Heydasch, T. (2012). Personality, punishment and public goods: Strategic shifts towards cooperation as a matter of dispositional honesty–humility. European Journal of Personality, 26(3), 245-254.

Hoffman, E., McCabe, K., Shachat, K., & Smith, V. (1994). Preferences, property rights, and anonymity in bargaining games. Games and Economic behavior, 7(3), 346-380. https://doi.org/10.1177/1073191113514105

Jones, D. N., & Paulhus, D. L. (2014). Introducing the Short Dark Triad (SD3): A brief measure of dark personality traits. Assessment, 21(1), 28–41.

Kahneman, Daniel; Diener, Ed (2003). Well-being: the foundations of hedonic psychology. Russell Sage Foundation.

Kahneman, Daniel; Tversky, Amos (1979). "Prospect Theory: An Analysis of Decision under Risk" (PDF). Econometrica. 47 (2): 263–291. CiteSeerX 10.1.1.407.1910. doi:10.2307/1914185. ISSN 0012-9682. JSTOR 1914185.

Matz, S. C., & Harari, G. M. (2021). Personality–place transactions: Mapping the relationships between Big Five personality traits, states, and daily places. Journal of Personality and Social Psychology, 120(5), 1367.

Moshagen, M., Hilbig, B. E., & Zettler, I. (2014). Faktorenstruktur, psychometrische Eigenschaften und Messinvarianz der deutschsprachigen Version des 60-item HEXACO Persönlichkeitsinventars. Diagnostica.

Nikiforakis, N., & Normann, H.‐T. (2008). A comparative statics analysis of punishment in public‐good experiments. Experimental Economics, 11, 358–369.

Persky, Joseph. "Retrospectives: The Ethology of Homo economicus." The Journal of Economic Perspectives, Vol. 9, No. 2 (Spring, 1995), pp. 221–231

Hilbig, B. E., Zettler, I., & Heydasch, T. (2012). Personality, punishment and public goods: Strategic shifts towards cooperation as a matter of dispositional honesty–humility. European Journal of Personality, 26(3), 245-254.

Ringwald, Whitney R., Aleksandra Kaurin, Katherine M. Lawson, Aidan G. C. Wright, and Richard W. Robins. 2024. "The Development of personality—From Metatraits to facets—Across Adolescence and into Adulthood in a Sample of Mexican-Origin Youth." Journal of Personality and Social Psychology 126 (6) (06): 1140-1160. doi:https://doi.org/10.1037/pspp0000487. https://www.proquest.com/scholarly-journals/development-personality-metatraits-facets-across/docview/2872992482/se-2

Rittenberg and Tregarthen. "Chapter 6" (PDF). Principles of Microeconomics. p. 2. Retrieved June 20, 2012

Roberts, B. W., & Yoon, H. J. (2022). Personality psychology. Annual review of psychology, 73(1), 489-516

Roberts, B. W., Caspi, A., & Moffitt, T. E. (2003). Work experiences and personality development in young adulthood. Journal of Personality and Social Psychology, 84(3), 582–593. https://doi.org/10.1037/0022-3514.84.3.582

Wrzus, C., Quintus, M., & Egloff, B. (2023). Age and context effects in personality development: A multimethod perspective. Psychology and aging, 38(1), 1.

Zettler, I., Hilbig, B. E., & Heydasch, T. (2013). Two sides of one coin: Honesty–Humility and situational factors mutually shape social dilemma decision making. Journal of Research in Personality, 47(4), 286-295.

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