ECONOMIC THEORY 1A WEEK

Social Interactions
Outline
2

This lecture covers Chapter 4 of “The Economy”

textbook. In this chapter, we will use game theory
to:
[Link] how people interact based on
the constraints that limit their actions and
motives, as well as their beliefs about what other
people will do.
[Link] how equilibrium outcomes arise
in different types of games: the invisible hand
game, the prisoners’ dilemma game, the
ultimatum game and a public goods game.
Overview
3

 Our economy is shaped by millions of direct and indirect interactions among

people.

 These social interactions offer opportunities for mutual gains for instance, gains
from trade

 But conflicts often arise over how these gains should be distributed.

 The individual pursuit of self-interest may lead to socially beneficial outcomes, as

indicated in the idea of an ‘invisible hand’

 But there are interactions, called social dilemmas, in which people would do
better by cooperating rather than acting individually. When they don’t cooperate
(but act in their self interest) the outcome is worse for everybody, including
themselves.

 These social dilemmas occur when people do not take into account the effects of
their actions on others, called external effects

 And they give rise to the problem of free riding, where people benefit from the
contributions of others to a cooperative project without contributing themselves.

 Public goods are an example of a cooperative project where free riding means
that the market will not generate an efficient outcome.
Social dilemmas
Belling the cat
5
Æsop. (Sixth century B.C.) Fables.

LONG ago, the mice had a general

council to consider what measures
they could take to outwit their
common enemy, the Cat.

Some said this, and some said that;

but at last a young mouse got up and
said he had a proposal to make, which
he thought would meet the case.

“You will all agree,” said he, “that our chief danger consists in the sly and treacherous
manner in which the enemy approaches us. Now, if we could receive some signal of her
approach, we could easily escape from her. I venture, therefore, to propose that a small
bell be procured, and attached by a ribbon round the neck of the Cat. By this means we
should always know when she was about, and could easily retire while she was in the
neighbourhood.”

This proposal met with general applause, until an old mouse got up and said: “That is all
very well, but who is to bell the Cat?” The mice looked at one another and nobody spoke.

Then the old mouse said: “IT IS EASY TO PROPOSE IMPOSSIBLE REMEDIES.”
The tragedy of the commons
6

Picture a pasture open to all.

Each herdsman seeks to maximize his gain and will try to keep as many cattle
as possible on the commons.

He asks, ‘What is the benefit to me of adding one more animal?’

The benefit can be divided into

1) The positive component: the herdsman receives all of the proceeds from
the sale of the additional animal.

2) The negative component: the effects of overgrazing are shared by all of

the herdsman, so the negative impact for any decision-making herdsman is
only a fraction of the total negative effect.

The only sensible course for him to pursue is to add another animal to his herd.
And another….

But this is the conclusion reached by each and every herdsman sharing a
commons. Therein is the tragedy. Ruin is the destination towards which all men
rush, each pursuing his own best interest.

Freedom in the commons brings ruin to all. Paraphrased from Hardin (1968)
The tragedy of the commons relevant to common-pool
resources 7

■ Common-pool resources
– Resources that are shared, not owned by anyone
– Resources of this type (e.g. the earth’s atmosphere or
fish stocks) are easily overexploited unless we control
access in some way
– If you reduce your carbon footprint, or limit the number
of fish you catch, you will bear the costs,
while others will enjoy the benefits
■ Also relevant is the fallacy of composition –
■ The fallacy of composition refers to the logically untenable
position that what is true for a member of a group must
necessarily also be true for the group as a whole
■ e.g. if you stands up in the theatre you can see better, but it
is not the case if everyone stands up
Social Dilemmas
8

■ A situation in which actions taken independently by self-

interested individuals result in a socially suboptimal
outcome e.g. the tragedy of the commons, traffic jams,
climate change
■ Social dilemmas occur frequently and diminish the quality
of our lives and the lives of others.
■ One of the tasks of public policies is to address
social dilemmas.
Resolving social dilemmas
9

■ Altruistic preferences

– A person with these preferences cares about the implications for other
people. Given the chance he would prefer to help some other person,
even if it cost something to do so.
– There are many examples of willingness, or even desire, to help others
even at a cost to oneself (e.g. during wars, natural disasters – see
recent book by Rutger Bregman Humankind: A Hopeful History)
■ Community institutions

– Local communities can create their own institutions to regulate

behaviour
– An example: Customary rules designed by farmers in Valencia, Spain,
and the Tribunal de las Aguas (Water Court) to resolve conflicts
– Another example: taxi marshals?
■ Public policies

– Taxes and government spending

– Laws and Regulation (e.g. Fishing quotas)
Game theory
Game theory
11

■ A game is a model of strategic interaction

■ Game theory
– the study of mathematical models of strategic interaction
between rational decision-makers.
– It sets out a framework within which to analyse social
interactions
– It is widely used in economics, biology, politics (especially
international relations) and military strategy.
■ Social interaction: A situation in which the actions taken by
each person affect other people’s outcomes as well as their own.
■ Strategic interaction: A social interaction in which the
participants are aware of the ways that their actions affect others
(and the ways that the actions of others affect them).
■ Strategy: An action that a person may take when that person is
aware of the mutual dependence of the results for herself and for
others.
Game
12

A game describes a
social interaction, with Example:
the following elements: Rock-Paper-Scissors
Players
Who are involved in the
interaction

Feasible strategies
Actions each player can
take

Information
What each player knows
when choosing their action

Payoffs
Outcomes for every possible
combination of actions
Crop choice game
13

Specialization Scenarios
There is a benefit from producing
only one crop (e.g. tools and
investment required)

Endowments
Anil’s land is better suited to
cassava, Bala’s land is better
suited to rice

Benefit of interaction
If they don’t engage in strategic
interaction, but produce both crops
for subsistence, there benefits with
be lower

Independent action
Each acts independently, they are
unable to come to an agreement

Price is determined by supply

If they both bring the same crop to
market the price of that crop will
fall as there will be a glut.
Crop choice game

Players
Anil and Bala

Feasible strategies
Rice or Cassava
Information
Each farmer does not know
what the other chooses in
advance
Payoffs
Depend on market prices
and quality of land

Preferences and beliefs

• Players want to maximize only their own payoff
• They are rational egoists (They are not concerned with social norms or costs like
guilt, shame, reputation, trust…)
• Both players believe that the preferences of the other are the same as their own
A one-shot game
They interact only once
Payoff matrix 15

A table of the payoffs (numbers) associated with every possible

combination of strategies chosen by two or more players in a game
Best responses
16

■ We can use the payoff matrix to analyse what action a player would
choose if he knew what the other player will do.

■ Best response is the strategy that

will give a player the highest
payoff, given the strategies that
the other players select.

■ If Bala chooses Rice, Anil’s best

response is to choose Cassava -
that gives him 4, rather than 1.

■ What is Anil’s best response if

Bala chooses Cassava? Anil will
choose Cassava and receive 3
rather than the 1 he would get if
he chose Rice

■ Regardless of what Bala chooses,

it is therefore optimal for Anil to
grow Cassava – this is his
dominant strategy.
Dominant strategy
17

■ An action that yields the highest payoff for a player, no

matter what the other players do.

■ What is Bala’s dominant

strategy?
■ If Anil chooses Rice, Bala
choses Rice 3 > 2
■ If Anil chooses Cassava,
Bala Chooses Rice 4 >1
■ Note that a dominant
strategy need not always
exist – it depends on how
the payoffs are arranged
A dominant strategy equilibrium
18

■ Anil’s dominant strategy is to growth Cassava; Bala’s

dominant strategy is to grow Rice.

■ When Anil and Bala each play

their dominant strategy, the
outcome is (Cassava, Rice).
■ Dominant strategy
equilibrium: An outcome of
a game in which every player
plays his or her dominant
strategy
■ And equilibrium is a self-
perpetuating situation.
The invisible hand
19

■ The pursuit of self-interest without regard for others is sometimes

considered to be morally bad
■ But the study of economics has identified cases in which it can lead to
outcomes that are socially desirable.
■ Anil and Bala were pursuing their self interest – choosing a strategy
for which they got the highest payoff
■ This resulted an an equilibrium
outcome that was:
– the best for each player
(self-interest achieves 4
each)
– the strategy that yielded
the largest total payoffs for
the two farmers combined
(social optimum 4 + 4)
The prisoners’ dilemma
20

■ Textbook example - where the pursuit of

self-interest leads to results that are not
optimal.

■ Optimal outcome requires cooperation

between the two players but co-
operation is difficult and requires trust

■ Two people caught with drugs: the sentence is

one year.

■ Both are also charged with murder, which

carries a life sentence, but the cops don’t have
evidence and therefore need a confession.

■ If you both confess, the cops show leniency,

and each gets a sentence of ten years

■ If only one confesses and the other keeps

quiet the confessor goes free (drug charges
are dropped) and the other gets a life
sentence.

■ If both keep quiet, they both get one year for

the drugs charges (this is optimal for the
prisoner’s as total time in jail is 1 year plus 1
year = 2 years)
The prisoners’ dilemma
2
■ For Prisoner A 1

■ If B confesses, then Prisoner A’s best strategy is to

confess and get 10 years (if he keeps quiet he get 30
years)
Prisoner Confess Keep
■ If B Keeps quiet, then Prisoner A’s best strategy is to B Quiet
confess and get 0 years rather than 1 year if he
keep’s quiet
Prisoner
■ For Prisoner B A
■ If A confesses, then Prisoner B’s best strategy is to
confess and get 10 years (if he keeps quiet he get 30 Confess -10, -10 0, -30
years)

■ If A Keeps quiet, then Prisoner B’s best strategy is to

confess and get 0 years rather than 1 year if he quiet Keep -30, 0 -1, -1
Quiet
■ Therefore, the dominant strategy for both is to
confess so they both get 10 years (-10, -10)
(total jail time 20 years)

■ But the optimum strategy is for both A and B to

keep quiet and get one year (-1, -1) (total jail
time is 2 years)

■ The risk of keeping quiet is that if the other prisoner

confesses and incriminates the other, her or she will
receive 30 years in prison

■ In a prisoner’s dilemma there is something to gain

Golden Balls
2
Watch a video showing an application of the Prisoner’s Dilemma 2
where the participants must choose between splitting the cash or
taking all the cash and they risk losing everything depending on
what the other person decides

[Link]
Pesticide game (Application of prisoners’
dilemma) 23

Two farmers decide how to deal with

pest insects IPC: Integrated pest control by intruding beneficial
insects
Players
Terminator: an inexpensive chemical
Anil (A) and Bala (B)

Feasible strategies
Use Terminator (but contaminates
water) or Integrated Pest Control (IPC)
(no water contamination)

Strategic interaction

Terminator is cheaper then IPC.

If just one of A or B uses Terminator the

damage will be quite limited.

If both A and B use Terminator the

water contamination is serious and
they need to spend money on water
filtering

It is a prisoners’ dilemma type

game

As the pursuit of self interest results in

dominant equilibrium where A and B
both user Terminator, but if they
trusted each other and cooperated
they would both use IPC and achieve a
socially optimal outcome
Payoffs and Equilibrium in the pesticide game
24

■ For Anil – Terminator is dominant strategy

■ If Bala chooses IPC then Anil chooses Terminator as
payoff 4 > 3 (as Anil get benefit of cheap
eradication of pests as IPC spreads to his field with
little water contamination)
■ If Bala chooses Terminator then Anil choses
Terminator as 2 > 1 (as Anil avoids spending more
on IPC and IPC want work well for Anil as Bala’s
terminator kills beneficial pests)
■ Similarly, for Bala – Terminator is dominant strategy
■ If Anil chooses IPC then Bala chooses Terminator as
payoff 4 > 3
■ If Anil chooses Terminator then Bala choses
Terminator as 2 > 1
■ Final Result: When Anil and Bala each play their
dominant strategy, the outcome is (Terminator,
Terminator).
■ This is the dominant strategy equilibrium, where
both Anil and Bala Receive payoff of 2,
■ The socially optimal outcome would be if both
used IPC i.e. payoff 3 + 3> 2 + 2 i.e. if the
could both agree to spend more on IPC they
would have better pest control and no water
contamination rather then the actual outcome
where cheaper Terminator is used, pests are
eliminated, but water is contaminated and has
to be filtered
What about the impact of social preferences like altruism?
25

 For example, if Anil had cared sufficiently about the harm that he would inflict on
Bala by using Terminator when Bala was using IPC, then IPC would have been
Anil’s best response to Bala’s IPC.
 The feasible frontier-indifference curve (MRS=MRT) economic models we used
in Week 3 assumed self-interested preferences: the student, the farmer and the
workers, cared about their own free time and their own grades or consumption.
 In reality - people generally do not care only about what happens to
themselves, but also what happens to others (especially family, loved-
ones, friends and neighbours)
 In such cases we say that the individual has social preferences.
 Altruism – or care for the welfare of others - is an example of a social
preference.
Modelling Altruistic Preferences as Indifference Curves
26

 Imagine another situation:

Say Anil was given a ticket for the national lottery, and it won a prize of 10
000 rupees. Anil can, of course, keep all the money for himself, but he can
also share some of it with his neighbour Bala.
Graphically – the points along the feasible frontier shows a zero sum
game, moving along the frontier the sum of any loss for Anil and any gain
for Bala is zero

Each point (x, y)

along the feasible
frontier show how
the 10 000 rupees
will be shared if
Anil keeps 10 000
then Bala gets ), if
Anil keeps 9 000
then Bala gets 1
000 (any gain for
Bala is less for
Anil)
Altruistic Preferences as Indifference Curves
27

 If Anil does not care at all about what Bala gets, his indifference curves
are straight vertical lines. He is indifferent to whether Bala gets a lot or
nothing.
 Anil prefers curves further to the right, since he gets more money.
Altruistic Preferences as Indifference Curves
28
 But Anil may care about his neighbour Bala, in which case he is happier if Bala is richer: that is, he derives
utility from Bala’s consumption. In this case Anil has downward-sloping indifference curves (non vertical)
 Bala is on a higher indifference curve (has greater utility when he keeps 7000 rupees and gives Bala 3000)
than if he keeps 10000
 Steep indifference curve shows that for any amount to be given to Bala, Anil will only be prepared to
give up a small amount
 Less Steep indifference curve shows that for any amount to be given to Bala, Anil will be prepared to give
up a larger amount
 NOTE: Your indifference curve is likely to be less steep for people you love and have empathy and more
steep for people you do not like or not know (as such degree of solidarity with community or nation would
impact on your social preferences)
Impact of altruism on prisoner’s dilemma
29

No change to prisoner’s dilemma outcome: If Anil does not

care about Bala’s wellbeing, his indifference curves are vertical
lines.
Change to prisoner’s dilemma outcome: If Anil does care
about Bala’s wellbeing, he has downward-sloping indifference
When Anil cares about
curves.
Bala’s wellbeing,
indifference curves are
downward-sloping and (I,
I) is his most preferred
outcome (highest
indifference curve).
- if Bala chooses IPC, Anil
should choose IPC even
though 3<4, as he is
altruistic and is happy
that Bala also gets 3
- if Bala chooses T, Anil
will still choose IPC even
though 1<2 since due to
his altruism he prefers (I,
T) (1,4) to (T, T) (2,2) as
he is altruistic and is
happy that Bala gets 4
Public goods (example of paying for
irrigation) 30

■ Four small farmers share the benefits of a common irrigation system

■ Each farmer decides whether to contribute to maintenance of the common
irrigation system
■ Contributing has a personal cost of $10 each.
■ The $10 is the minimum payment to fix up leaks, remove weeds etc.
■ For each $10 contributed the improved flow of waters benefits all four farmers,
due to improve crop yield.
■ The value of that benefit is $8 due to increased crop yield.
■ i.e for every $10 contributed, each farmer receives a benefit of $8.
■ Public Good: a good for which use by one person does not reduce its availability
to others (also called a non-rival good).
Public goods game
31
■ Let’s look at it from the perspective of one farmer: Kim. She has two
feasible strategies: contribute (i.e. cooperate) or don’t contribute
(i.e. defect)
■ For example, if two of the other farmers contribute, Kim will receive a
benefit of $8 from each of their contributions:
■ Option 1 if Kim makes no contribution herself, her total payoff is $16.
■ Option 2: If Kim decides to contribute, she will receive an additional
benefit of $8 but she will incur a cost of $10, so her total payoff is $14
Kim’s payoffs in the public goods
Calculation for Kim if two other
game
farmers are contributing 25 24
Kim's payoff if she contributes 22
Kim's payoff if she does not contribute
Payoff from not contributing 16 20

Cost of Kim’s contribution -10 16

15 14
Benefit of Kim’s contribution (for 8
Kim) 10
Kim's payoff

8
Payoff from contributing 14 6
5

0
0

-2
-5

0 1 2 3
Number of other farmers contributing
Free-rider problem
32

 When two other farmers are contributing, Kim’s payoff is lower if she contributes too.
 She will have an incentive not to contribute the the public good and be a free rider –
gaining a payoff of $16 instead of $14
 While it is Kim’s dominant strategy and it makes sense to her not to contribute, as a
result fewer resource overall will be invested in the public good irrigation scheme. It is a
prisoner’s dilemma scenario - where the pursuit of self-interest leads to less than optimal
outcomes
 If the farmers care only about their own monetary payoff, there is a dominant strategy
equilibrium in which no one contributes and their payoffs are all zero.
 On the other hand, if all 4 farmers contributed, each would get $22 due to increased crop
yield.
 Everyone would benefit if everyone cooperated, but irrespective of what others do, each
farmer does better by free riding on the others.
 Altruism could help to solve the free rider problem: if Kim cared about the other farmers,
she might be willing to contribute to the irrigation project. But if large numbers of people
are involved in a public goods game, it is less likely that altruism will be sufficient to
sustain a mutually beneficial outcome.
 Economist Elinor Ostrom showed that sustainable use of common property may be
enforced by actions that clearly deviated from the hypothesis of material self-interest. In
particular, individuals would willingly bear considerable costs to punish violators of rules
or norms. In this way the free-rider problem and the tragedy of the commons may be
overcome through self-governing community organisation.
Summary of Games Analysed
33

 Crop choice game (Invisible hand) the dominant strategy

of all players results in mutually beneficial outcomes

 Pesticide game (Prisoner’s dilemma): The dominant

strategy equilibrium results in a sub-optimal outcome for all
players

 Irrigation game (Public goods): same result as the

prisoner’s dilemma (but with more than two players) in that
incentive for individuals to be free riders leads to sub-
optimal outcome for all players
Note on Repeated games
34

■ We have so far looked at one-shot games.

■ Ongoing relationships are an important feature of social interactions that
was not captured in the models we have used so far: life is not a one-shot
game.
■ Obviously in real life we have ongoing relationships. One would think that
all the farmers we have looked at will be thinking about next season, and
the season after that
■ Better outcomes can arise in repeated interactions due to social norms,
reciprocity, and peer punishment.
■ Behaving selfishly in one period has consequences in future periods, so it
may no longer be a dominant strategy.
■ In a repeated prisoner’s dilemma, we could expect different outcomes:
– In season 1, Bala adopts IPC. What is Anil’s best response if he knows
there will be future seasons.
– He might think: “If I play IPC, then maybe Bala will continue to do so,
but if I use Terminator then my profits will be higher this year, but
next year Bala will also switch to Terminator then my profits will be
worse from then on.”
■ Also, if there is an ongoing relationship, Anil and Bala, or Kim and her
neighbors, might begin to care more altruistically about the welfare of
Ultimatum Game
and Social
Preferences
Ultimatum game
36

■ The ultimatum game is used by economists to study social preferences

■ It is a sequential game, where two players (the Proposer and the Responder)
choose how to divide up a cash prize
■ A sum of money ($100) is made available to a Proposer, but on condition that she
shares it with the Responder
■ There are gains from
cooperation for both if they
can agree how to split the
money
■ Proposer has $100 to split.
■ She makes a take-it-or-
leave-it offer
■ After observing the offer, the
Responder accepts or rejects
it
■ Payoffs:
If the offer is rejected,
both individuals get nothing.
If it is accepted, the split is
implemented and both
individuals get something
Testing for social preferences in the ultimatum game
37

■ Rational self-interest: A responder who cares only about own

payoffs would accept any positive offer, because something is
better than nothing.
■ Social preference: A responder who thinks that the
proposer’s offer has violated a social norm of fairness, or that
the offer is insultingly low for some other reason, might be
willing to sacrifice the payoff to punish the Proposer.
■ Experimental data:
– shows that very few people do behave with pure rational
self-interest
– shows that people have social preferences and that they
are prepared to pay a price to punish unfairness
The Responder’s Reciprocity Motive
38

 Reciprocity a preference to be kind or to help others who are kind and

helpful, and to withhold help and kindness from people who are not
helpful or kind.
 Suppose $100 is to be split in an ultimatum game and there is a
fairness norm of 50-50.
 If the Proposer proposes that the Responder get $50 or more, (y ≥ 50),
the Responder will accept the proposal because the Proposer conforms
to, or is even more generous than, the social norm.
 But if the offer is below $50, then the Responder may reject the offer to
punish the Proposer for this breach.
 Rejection means that both receive nothing!
 So, if the Responder rejects the offer, it must mean that the
satisfaction that she gets from punishing the Proposer must
outweigh the satisfaction that she gets from accepting the
Proposer’s offer.
The Responder’s rejection equation
39

 Suppose the Responder’s willingness to punish the Proposer depends on the size
of the breach of the 50-50 social norm.
 the Respondent’s satisfaction at rejecting an offer by the Proposer is shown by
R(50 – y)
 e.g. if the offer y is 50 then R(50-50) = 0 willingness to punish the proposer
 e.g. if the offer y is 10 then R(50-10) = 40R willingness to punish the proposer
 which shows that
 (1) the smaller is y (the offer) the greater is the willingness to punish the
proposer and
 (2) the greater is R (the social preference for reciprocity) the greater is the
willingness to punish the proposer

 Then, the Responder’s total level of satisfaction depends on two things:

(1) The Respondent’s satisfaction at rejecting an offer R(50 – y), and
(2) the gain from accepting the offer (y)
The decision to accept or reject an offer just depends on which of these two
quantities is larger i.e. responder will reject an offer if y < R(50 − y)
To calculate minimum acceptable offer
40

 Responder will reject an offer if y < R(50 − y) i.e. if offer is less than
satisfaction of rejecting the offer
 To calculate her minimum acceptable offer we can rearrange this rejection
equation like this:

 R = 1 then Responder will reject any offer of less than $25 from the Proposer
 The cut off point of $ 25 is where the Responders two motivations (1) of monetary
gain and (2) punishing the proposer for deviating from the social norm of fairness
balance out,
 if Responder rejects the $25 she loses $25 but receives $25 of satisfaction from
punishing the Proposer and making the Proposer’s payout = $0
 The more the Responder cares about reciprocity (as R rises), the higher the
Proposer’s offers have to be e.g. if R = 2, then the minimum, offer must be 100/3 =
R33,33 or it will be rejected by the Responder
What do experiments show about the
Ultimatum Game? 41

In a world composed only of self-interested individuals, the Proposer would

anticipate that the Responder would accept any offer and, for that reason,
would offer the minimum possible amount knowing it would be accepted.
But in experiments low offers get rejected as Respondent’s punish deviations
from social preference of fairness

For Kenyan farmers and

US Students 100% of
offers of a 50-50 split
were accepted
But, Kenyan farmers
reject 90% of offers of a
20-80 split
And US students reject
only about 40% of such
offers
Conclusion Kenyan
farmers are very
unwilling to accept
low offers (higher
concern with
fairness), but US
students are more
willing to accept low
Expected Payoffs
42
 expected payoff for Proposers in Kenyan context = (the payoff
you get if the offer is accepted)*(the probability that it will be
accepted)

Findings

In Kenya: offering a
60-40 split
maximized the
Proposer’s
expected pay-off,
In the US: offering
a 70:30 split
maximized the
Proposer’s
expected pay-off
Concluding Note: Beware of unintended
43
consequences
■ Example: Introduction of ‘fine for lateness’ in day-care centres (about $3)
■ Economic incentives replaced social preferences.
■ And led to the unintended consequences of increased lateness among
parents
Beware of unintended consequences
44
 The ‘price of lateness’ went from zero to about $3 at the time.
 Surprisingly, after the fine was introduced, the frequency of late pickups
doubled.
 Why did putting a price on lateness backfire?
 One possible explanation is that before the fine was introduced, most parents
were on time because they felt that it was the right thing to do.
 In other words, they came on time because of a moral obligation to avoid
inconveniencing the day care staff.
 Perhaps they felt an altruistic concern for the staff, or regarded a timely
pick-up as a reciprocal responsibility in the joint care of the child.
 But the imposition of the fine signalled that the situation was really more like
shopping. Lateness had a price and so could be purchased.
 The use of a market-like incentive—the price of lateness—had provided what
psychologists call a new ‘frame’ for the decision, making it one in which self-
interest rather than concern for others was acceptable.
 When fines and prices have these unintended effects, we say that incentives
have replaced social preferences.
 It is noteworthy, that if even when the fine were removed, parents continued to
pick up their children late as a new norm had been created.