Narrow self-interest is often used as a simplifying assumption when studying people making decisions in social contexts. Nonetheless, people exhibit a wide range of different motivations when choosing among interdependent outcomes. Measuring the magnitude of the concern people have for others, sometimes called Social Value Orientation (SVO), has been an interest of many social scientists for decades and several different measurement methods have been developed thus far.

The assumption of narrow self-interest is fundamental to rational choice theory. The assumption postulates that Decision Makers (DMs) are concerned about maximizing their own material gain, indifferent to the payoffs of other DMs around them. This is a simplifying assumption that yields a powerful apparatus to predict and explain human behavior across a wide variety of domains. However there are reliable counterexamples demonstrating that DMs' elicited preferences and choices are influenced in part by the payoffs of other DMs thus challenging what some have termed the
selfishness axiom.

To illustrate the notion of interdependent interests, consider the following choice between two options. In each case the DM is choosing between certain distributions of money, one portion to herself and some portion to be given to another person who is unknown to her. The DM and the other person will remain mutually anonymous while and after the decision is made. Hence this is not a strategic decision (i.e., not within the purview of Game Theory as only one DM influences the payoffs of both people, hence there are not strategic concerns) but rather is a one-shot individual decision. Anonymity removes the potential influence of fear of reprisal, reciprocity, reputation, etc.

BinaryDecision

The “rational” solution to this choice is trivial; a selfish rational DM (Homo economicus) would select option 2 as it results in a larger individual payoff. That, by choosing option 2 over option 1, an extra $15 is gained at a “cost” of $35 from another person is immaterial from the normative vantage point: the only pertinent consideration is the DM's individual payoff, irrespective of the payoffs to other DMs.

In this instance, the normative account diverges from actual behavior. We find that incentivized DMs, in an anonymous one-shot decision context, choose option 1 about 40% of the time, a finding that is consistent with other research results. Studies on the motivations that underlie interdependent decision behavior have a long history and these motivations have been referred to by a variety of names, including: social preferences, social motives, other regarding preferences, and social value orientation (SVO).

SVO is of utmost importance in understanding how interrelated DMs allocate scarce resources among themselves and others. The postulate of narrow self-interest is a point conjecture, namely that DMs have exactly zero interest in the outcomes of other people. Although this is a useful baseline assumption in that it facilitates tractable models with precise predictions, and in many cases works well as an “as if” model, there are numerous examples where it fails to account for DMs' behavior. Real people's preferences are often much richer, more nuanced, and complex than narrow self-interest. Moreover it is worth recognizing that the point conjecture is inadequate, not only to account for different people having different social preferences, but the malleability of these preferences in different situations and social contexts.


For more details about SVO, see some papers below as well as the
paper based versions and the scoring procedures for the SVO Slider Measure.





  • Nax, Heinrich H., Murphy, R. O., & Ackermann, K. A. (2015). Interactive preferences. Economics Letters, 135, 133-136, online at DOI:10.1016/j.econlet.2015.08.008, Link.