A lecture given by prof. Eric van Damme at ERGO Xtra I, 4 October 2017 at Erasmus University Rotterdam. Eric van Damme is one of the researchers in the research project ‘What Good Markets are Good for.’ This presentation is based on previous joint work with Siegwart Lindenberg (Universities of Groningen and Tilburg).

Abstract

Whereas mainstream economics is based on the assumption that people have stable preferences, psychology teaches us that people are driven by a variety of motives. Modern economics acknowledges that not all people are purely selfish and materialistic and allows for cooperators and reciprocators, but it still assumes that the “type” of an agent is fixed. In our work, we distinguish between three main individual goals (hedonic, gain and normative) and recognize that the personal motive that is dominant may depend on the situation and on the dominant motives of the other players in the interaction. As a consequence, framing a situation as a market or as being competitive might trigger a different motivation. Furthermore, normative motives may be crowded out when other persons, especially “significant others” display immoral behavior. We use this framework to assess under which conditions markets may crowd in or crowd out desirable behavior. One conclusion is that the market needs rules of fair play, which need to be seriously enforced.

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