Introducing social contract to anarchy: an experimental study

Abstract

In this study, we conducted a laboratory experiment simulating three different societies: anarchic society, neutral society, and utopian society. From anarchic society to utopian society, the level of social contract varies. Social contract defines the extent to which people agree to give up some of their freedoms and obey to the authority of the ruler or magistrate in exchange for protection of their remaining rights. The objective of our study is to investigate whether subjects’ behavior under the three different institutional setups is consistent with equilibrium predictions given by the theory, and how individuals’ social preferences play a role in the process. We use the propensity to engage in dishonest behavior that causes negative externalities on a third party, as our measure for social preferences. We found that, overall, society with a more complete social contract has a higher degree of welfare. From the findings, it is evident that introducing social contract could improve the efficiency of a society and a complete social contract may bring about a utopia.