This paper aims to study the value of sociality. Recent experimental evidence has brought to light that the assumptions of the Prospect Theory by Kahneman and Tversky do not hold…
This paper aims to study the value of sociality. Recent experimental evidence has brought to light that the assumptions of the Prospect Theory by Kahneman and Tversky do not hold in the proposed substantive domain of “sociality”. In particular, the desire to be a part of the social environment, i.e. the environment where individuals make decisions among their peers, is not contingent on the framing. Evolutionary psychologists suggest that humans are “social animals” for adaptive reasons. However, entering a social relationship is inherently risky. Therefore, it is extremely important to know how much people value “sociality”, when the social outcomes are valued more than material outcomes and what kinds of adaptations people use.
We develop a new theory and propose the general utility function that features “sociality” component. We test the theory in the laboratory experiments carried out in several countries.
Our results suggest that when stakes are low the theory of “sociality” is successful in predicting individual decisions: on average, people do value “sociality” and it surpasses the monetary loss.
The main contribution of this paper is the breakdown of the risk attitudes under low stakes and individual level of decision-making. Another advancement is the ability to formalize the social utility or the theory of “sociality” in an economic model; we use general utility function that we define both on the outcomes and on the process of the decision-making itself and test in laboratory studies.