Time Horizons in Interdependent Security

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Time Horizons in Interdependent Security

• David Hardisty, Howard Kunreuther, David Krantz,
  Poonam Arora
• Columbia University

International Conference on Social
Dilemmas Kyoto, Japan August 24, 2009
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Co-Authors
Howard Kunreuther
Dave Krantz
Poonam Arora

• NSF Grants SES-0345840 SES-0820496

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IDS Background

• Interdependent Security (IDS) is a social dilemma
  with stochastic losses
• examples
• border security
• pest/disease control
• risky investment

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(No Transcript)
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Thank You ICSD 2009 Organizing Committee

• Satoshi Fujii
• Toshio Yamagishi
• Tsuyoshi Hatori
• Akira Kikuchi
• Haruna Suzuki

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Previous Findings on IDS

• Individuals cooperate less in IDS than in a
  typical repeated PD (Kunreuther et al, in press)
• However groups cooperate more in IDS (Gong, Baron
  Kunreuther, in preparation)

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Research Motivation (1)

• Previous studies used probabilities of 20 to 80
• Real life risks are often much lower

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Research Motivation (2)

• In real life, players often precommit their
  strategy (whether to invest in protection) for
  several years in advance at a time
• example CO2 reductions

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Research Motivation (2)

• Normally, greater delay is associated with
  increased uncertainty
• example 10 promised today or in 20 years
• However, with repeated low probability events,
  increasing time horizon may increase subjective
  probability
• example chance of fire today or in the next 20
  years

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Study 1

• Question 1 Do previous findings of low (30)
  cooperation under uncertainty hold with low
  probabilities? Or will it be even lower?
• Question 2 Does precommitment raise investment
  rates?

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IDS instructions (pg 1)

• Scenario Imagine you are an investor in
  Indonesia and you have a risky joint venture that
  earns 8,500 Rp per year. However, there is a
  small chance that you and/or your counterpart
  will suffer a loss of 40,000 Rp in a given year.
  You have the option to pay 1,400 Rp for a safety
  measure each year to protect against the possible
  loss. However, you will only be fully protected
  if both you and your counterpart invest in
  protection. The loss has an equal chance of
  happening each year, regardless of whether it
  occurred in the previous year.

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IDS payoff matrix
Your Counterpart Your Counterpart
INVEST NOT INVEST
You INVEST - You definitely lose 1,400 Rp, and have a 0 chance of the large loss occurring.- Your counterpart definitely loses 1,400 Rp, and has a 0 chance of the large loss occurring. - You definitely lose 1,400 Rp and have a 1 chance of losing an additional 40,000 Rp.- Your counterpart has a 3 chance of losing 40,000 Rp and a 97 chance of losing 0 Rp.
You NOT INVEST - You have a 3 chance of losing 40,000 Rp and a 97 chance of losing 0 Rp.- Your counterpart definitely loses 1,400 Rp and has a 1 chance of losing an additional 40,000 Rp. - You have a 4 chance of losing 40,000 Rp and a 96 chance of losing 0 Rp.- Your counterpart has a 4 chance of losing 40,000 Rp and a 96 chance of losing 0 Rp.
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PD payoff matrix
Your Counterpart Your Counterpart
INVEST NOT INVEST
You INVEST - You lose 1,400 Rp.- Your counterpart loses 1,400 Rp. - You lose 1,800 Rp. - Your counterpart loses 1,200 Rp.
You NOT INVEST - You lose 1,200 Rp.- Your counterpart loses 1,800 Rp. - You lose 1,600 Rp.- Your counterpart loses 1,600 Rp.
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IDS Choices

• Will you invest in protection this year?
• INVEST NOT INVEST
• Do you think your counterpart will invest in
  protection this year?
• DEFINITELY PROBABLY PROBABLY NOT DEFINITELY
  NOT

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Precommitted Condition

• Will you invest in protection in year 1?
• INVEST NOT INVEST
• Do you think your counterpart will invest in
  protection in year 1?
• DEFINITELY PROBABLY PROBABLY NOT DEFINITELY
  NOT
• 
  Will you invest in
  protection in year 2?
• INVEST NOT INVEST
• Do you think your counterpart will invest in
  protection in year 2?
• DEFINITELY PROBABLY PROBABLY NOT DEFINITELY
  NOT
• 
  ...
• Will you invest in protection in year 20?
• INVEST NOT INVEST
• Do you think your counterpart will invest in
  protection in year 20?
• DEFINITELY PROBABLY PROBABLY NOT DEFINITELY
  NOT

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Feedback

• Year 1 Results
• Your choice INVEST
• Your counterpart's choice NOT INVEST
• The random number was 88
• This Means
• For you, the large loss did not occur
• For your counterpart, the large loss did not
  occur
• Result You lost 1,400 Rp, and your counterpart
  lost 0 Rp

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Design Details

• participants played blocks of 20 rounds (years)
  with an anonymous partner
• 4 blocks total
• random pairing before each block
• 1 block paid out for real money
• all manipulations between subject, 30 subjects
  per group

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PD vs IDS
1
0.9
0.8
0.7
0.6
IDS rep
Investment Proportion
0.5
PD rep
0.4
0.3
0.2
0.1
0
Block 1
Block 2
Block 3
Block 4
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PD vs IDS
1
0.9
0.8
0.7
0.6
IDS rep
Investment Proportion
0.5
PD rep
0.4
0.3
0.2
0.1
0
Block 1
Block 2
Block 3
Block 4
20
PD vs IDS
1
0.9
0.8
0.7
0.6
IDS rep
Investment Proportion
0.5
PD rep
0.4
0.3
0.2
0.1
0
Block 1
Block 2
Block 3
Block 4
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Conclusion 1

• Uncertainty lowers cooperation between
  individuals playing loss framed dilemma
• Why? - Perhaps uncertainty makes players more
  greedy (Johansson Svedsater, yesterday)-
  Perhaps uncertainty transforms the game from a
  social dilemma to a game of chance

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IDS repeated vs precommitted
1
0.9
0.8
0.7
0.6
IDS rep
Investment Proportion
0.5
IDS pre
PD rep
0.4
0.3
0.2
0.1
0
Block 1
Block 2
Block 3
Block 4
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IDS repeated vs precommitted
1
0.9
0.8
0.7
0.6
IDS rep
Investment Proportion
0.5
IDS pre
PD rep
0.4
0.3
0.2
0.1
0
Block 1
Block 2
Block 3
Block 4
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Conclusion 2

• Under uncertainty, precommitment raises
  cooperation
• Why? Perhaps precommitment raises subjective
  probability of the loss

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Precommitted Participants Estimated Higher
Cumulative Probability
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Interesting results, but a major confound

• Feedback

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Study 2

• Question Do individuals playing a (non-dilemma)
  solo game invest more often when precommitting?

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Solo payoff matrix
INVEST - You definitely lose 1,400 Rp, and have a 0 chance of the large loss occurring.
NOT INVEST - You have a 4 chance of losing 40,000 Rp and a 96 chance of losing 0 Rp.
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IDS repeated vs Solo repeated
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IDS repeated vs Solo repeated
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Conclusion 3

• IDS players are mostly playing a game of chance,
  showing risk-seeking for losses

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Support 3
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Solo repeated vs precommited
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Solo repeated vs precommited
1
0.9
0.8
0.7
0.6
IDS rep
IDS pre
Investment Proportion
0.5
Solo rep
0.4
Solo pre
0.3
0.2
0.1
0
Block 1
Block 2
Block 3
Block 4
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Conclusion 4

• Precommitment raises investment rates by
  individuals
• Why? Perhaps subjective probability is increased

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How else can we improve investment under
uncertainty?

• Perhaps environmental framing can highlight
  social goals and raise investment rates
• However, earlier results are mixed

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Study 3

• Question Will environmental framing will
  increase investment rates?

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IDS environmental instructions

• Scenario Imagine you are a farmer in Indonesia.
  You get an annual yield of 8,500 Rupiah (Rp) from
  your potato crops. Both you and a neighboring
  farmer use the pesticide Aldicarb on your potato
  crops. However, there is a small risk of
  groundwater contamination each year from this
  pesticide, which is toxic. If contamination
  occurs, you and/or your neighboring farmer will
  suffer a loss of 40,000 Rp, to pay for
  groundwater cleanup. You have the option to
  switch to a more expensive, though safer,
  pesticide, at the cost of 1,400 Rp annually, to
  avoid groundwater contamination. However, you
  will only be fully protected if both you and your
  counterpart invest in the safer pesticide. The
  groundwater contamination has an equal chance of
  happening each year, regardless of whether it
  occurred in the previous year.

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IDS environmental payoff matrix
Your Counterpart Your Counterpart
INVEST NOT INVEST
You INVEST - You definitely lose 1,400 Rp, and have a 0 chance of groundwater contamination.- Your counterpart definitely loses 1,400 Rp, and has a 0 chance of groundwater contamination. - You definitely lose 1,400 Rp and have a 1 chance of groundwater contamination occuring and losing an additional 40,000 Rp.- Your counterpart has a 3 chance of losing 40,000 Rp due to groundwater contamination and a 97 chance of losing 0 Rp.
You NOT INVEST - You have a 3 chance of losing 40,000 Rp due to groundwater contamination and a 97 chance of losing 0 Rp.- Your counterpart definitely loses 1,400 Rp and has a 1 chance of groundwater contamination occuring and losing an additional 40,000 Rp. - You have a 4 chance of groundwater contamination occurring and losing 40,000 Rp and a 96 chance of losing 0 Rp.- Your counterpart has a 4 chance of groundwater contamination occurring and losing 40,000 Rp and a 96 chance of losing 0 Rp.
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IDS Environmental Choices

• Will you invest in the safer pesticide this year?
  
• INVEST NOT INVEST
• Do you think your counterpart will invest in the
  safer pesticide this year?
• DEFINITELY PROBABLY PROBABLY NOT DEFINITELY
  NOT

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Feedback

• Year 1 Results
• Your choice INVEST
• Your counterpart's choice NOT INVEST
• The random number was 88
• This Means
• For you, groundwater contamination did not occur
• For your counterpart, groundwater contamination
  did not occur
• Result You lost 1,400 Rp, and your counterpart
  lost 0 Rp

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Environmental Frame Results
43
Environmental Frame Results
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Environmental Frame Results
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Conclusion 5

• Environmental framing may not have a significant
  effect on investment rates

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Study 4

• Question How does precommitment affect
  investment rates in a deterministic prisoners
  dilemma

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IDD payoff matrix
Your Counterpart Your Counterpart
INVEST NOT INVEST
You INVEST - You lose 1,400 Rp.- Your counterpart loses 1,400 Rp. - You lose 1,800 Rp. - Your counterpart loses 1,200 Rp.
You NOT INVEST - You lose 1,200 Rp.- Your counterpart loses 1,800 Rp. - You lose 1,600 Rp.- Your counterpart loses 1,600 Rp.
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PD Repeated vs Precommitted
1
0.9
0.8
0.7
0.6
PD rep
Investment Proportion
0.5
PD pre
0.4
0.3
0.2
0.1
0
Block 1
Block 2
Block 3
Block 4
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PD Repeated vs Precommitted
1
0.9
0.8
0.7
0.6
PD rep
Investment Proportion
0.5
PD pre
0.4
0.3
0.2
0.1
0
Block 1
Block 2
Block 3
Block 4
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Conclusion 6

• Precommitment reduces investment rates in
  deterministic social dilemmas
• Why? Perhaps individuals realize there is no
  opportunity for reciprocity and are worried about
  being a sucker

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Summary

• Precommitment lowers cooperation in regular
  prisoners dilemma, but raises it in
  interdependent security situations
• Why? In IDS, precommitment raises subjective
  probability of loss, but in the deterministic
  case it removes the possibility of reciprocity

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Thank You!
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References

• Gong, M. J. Baron and H. Kunreuther (2008). Group
  Cooperation under Uncertainty. Wharton Risk
  Center Working Paper 2008-11-24
• Kunreuther, H., G. Silvasi, E. Bradlow, and D.
  Small (in press). Deterministic and Stochastic
  Prisoner's Dilemma Games Experiments in
  Interdependent Security.  Judgment and Decision
  Making.
• Xiao, Erte Kunreuther, H. (in preparation).
  Punishment and Cooperation in Stochastic Social
  Dilemmas.

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Questions

• Do you believe the risk perception story?
• What new conditions would be most interesting?
  All-or-nothing precommitment? Group play? Change
  the payoffs (so non-investment dominates)?
• What journals do you recommend publishing in?
• What are the biggest holes in this story?

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What about individual differences?
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Comprehensive Health Insurance
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Gender
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Gender
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First-Round Comparison
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Overall Comparison
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20-Round Profile
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80 Round Profile
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What did people say?
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IDS - Repeated

• The probability of loosing was too low so I
  didn't decide to invest.
• For the most part, it seemed better NOT to invest
  than to invest. I found that the initial 1-5
  years influenced how I invested in the remaining
  15 years. So if I mainly did NOT invest the first
  5 years, then I didn't invest for the remaining
  15 years. I also found that my partner followed
  how I invested if I had no losses.
• I chose not to invest dut to low probality of
  loss
• It was a little intimidating, but after awhile an
  understanding occurred between myself and my
  partner and we flowed fairly well over the years.
• I chose to invest in the beginning so I wouldn't
  end up with negative numbers. Afterwards, I chose
  not to invest because I figured the chances of
  losing 40,000 were small, and even if I lost the
  money once, I would probably not lose it again in
  the 20 year span.

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IDS - Precommitted

• I chose to invest almost all 20 times except for
  one or 2 years to make an extra bonus
• An interesting game where I can observe that some
  people do take risks. I chose to invest in every
  year and every scenario since statistically it
  makes more sense to invest in protection. The
  loss is big compared to the amount spent on
  protection and there is an average of more than
  one occurrence of loss in a 20 year period even
  if only one person invests.
• I invested too many times the first round, and
  when I saw that my partner rarely invested and
  suffered little losses, I invested less as well
  by the next round. I felt rather smug when he/she
  lost 40k while I invested-- but I thought it was
  interesting that I invested a lot more often than
  most of my counterparts.
• Initially I was just playing it safe, and then
  for the 2 later rounds I pretty much went with
  the Nash Equilibrium choice of Not Investing.

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Solo - Repeated

• At first, it seemed as though investing would be
  a good idea. After the second round, I realized
  that not investing would probably give a better
  payout because the chances of actually suffering
  a loss was so slim.
• I mainly choose to not invest because there was
  only a 4 chance of losing 40000 Rp. But then
  every 4 or 5 turns, I would randomly decide to
  invest in protection. Now that I think about it,
  even if I hadn't gone with investing at all, the
  outcome may have been the same or maybe even
  better.
• I would invest at points where I thought that I
  was happy enough with my cumulative gains that I
  didn't want to risk losing what I had already
  gained.

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Solo - Precommitted

• It's obvious safer to invest, and the investment
  totally worth that. Even if you invest for 20
  years, the cost is lower than one large loss
  which might happen every year. However, as there
  was no large loss happened in the first session,
  I therefore chose to take some risks in following
  sessions.
• The potential loss from investing every time
  seemed less than from not investing more often
  where even one bad year could produce less
  income.
• 40000 Rp possible loss 4 chance 1600 Rp loss
  expected. So in general it's worth it to invest.
  However, given the low likelihood, it might be
  worth it to take a risk skip some years.

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Why Groups Cooperate More than Individuals in
SPD- Safety Oriented to Avoid Guilt and Blame

• People take less risk when their decisions affect
  others (Charness and Jackson 2008)
• In DPD
• Defection is always better off
• No ex post guilt or blame
• In SPD
• Defection has a higher expected payoff, but also
  a higher probability of suffering a loss.
• If a large loss follows defection ?ex post guilt
  and ex post blame for the one who suggested
  defection
• Group members favor safety-oriented strategy
  (cooperation) to avoid ex post guilt and blame?
  Reversed discontinuity effect

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Why Groups Cooperate More than Individuals in
SPD -Social Pressure to Conform to Certain Norms

• Three norms are most relevant in PD games Being
  pro-group, Being smart, and Being nice
• Similar to the group morality and individual
  morality argument (Cohen 2006 Pinter 2007)
• In DPD
• Both pro-group (group morality) and smart norm
  clearly indicate defection
• Niceness (individual morality) is clouded
• In SPD
• Unclear what strategy is pro-group and smart
• Being nice is socially desirable and more salient
  than in DPD.