|M.Sc Student||Yafe Hadas|
|Subject||The Restaurant Problem|
|Department||Department of Industrial Engineering and Management||Supervisors||PROF. Anat Rafaeli|
|PROF. Rann Smorodinsky|
This research explores social dilemmas, which involve inefficient levels of production and consumption when externalities are involved. The unscrupulous diner’s dilemma is suggested as a situation that questions the assumption of economic theory that human agents maximize their selfish payoff without regard for others.
In order to address the possibility that unselfish motives mitigate the inefficiency implied by mainstream predictions, we examine whether human agents tend to actually ignore costs imposed on others when reaching economic decisions.
Experimental studies generally find evidence against theories based on selfish motives. These experiments typically find that subjects cooperate at a level that cannot be explained by mainstream economic theory.
To compare actual behavior with the predictions of classic economic theory, the unscrupulous diner’s dilemma was examined with several groups of six subjects dining together at a popular restaurant. These settings were then replicated in the laboratory using verbal descriptions of the social situation, with no reference to restaurants or food.
We found that people in the restaurant behave in line with standard economic theory. But in the laboratory, there was no difference between conditions that involved externalities and those that did not. We conjecture that in more familiar environments and with more consequential decisions, subjects are likely to act in conformity with standard assumptions of selfish maximization. The removal of too many situational characteristics in the laboratory setting carries the risk of fundamentally altering behavior.