Economics of apologies…

Ben Ho  of Vassar College has this nice and different voxeu piece on economics of apologies.
Using beh eco ideas, he says apologies given with intent can be really powerful:

Following the recent wave of apologies by politicians,1celebrities,2 and in particular by firms,3 there have been numerous commentaries about the nature of apology – in particular how it is pointless and overused. Recent research in the social science of apologies can help us understand their logic, and shed light on the purpose of the rituals of repairing social transgression.
….As a behavioural economist, my own research has focused on three goals, namely showing that:

  • apologies can have real economic consequences;
  • models based on economic incentives can explain how and when people give and receive apologies; and
  • economic theory can help us understand what it means when we say the words “I am sorry.”
What is the model behind this?

The fundamental insight of the model is that for an apology to restore the broken trust, the apology must be hard. The idea is based on a key insight of game theory that finds that our ability to signal a desirable quality depends on the cost of performing that signal. Signaling theory has traditionally been applied in contexts such as explaining a peacock’s extravagant plumage or understanding the value of an expensive college degree. The work here applies the idea of signaling to apologies and human relationships.

When we are wronged, we all want the transgressor to apologise. However, often when they apologise, we punish them for it. We make them feel bad. The reason? If an apology were easy, it would no longer have any meaning.

This simple insight that apologies work to restore relationships but are costly for the apologiser has powerful implications borne out in experiments I conducted with students in a lab. Subjects played a simple investment game that depended on trust. If the investment failed, they were allowed to apologise for that failure. The theory and experiment both show that apologies should be more common in long relationships, more common early in a relationship, and more common when there is a better match between the two parties.

Some say these recent examples of public apologies followed by public jeering and humiliation are just a waste of everybody’s time. But it is precisely the public jeering and humiliation that make the apologies effective.

What makes a good apology?

What does this research say about what makes for a good apology? Essentially, anything that makes the apology costly or difficult. Here are some types of apologies to consider:

  • “I’m sorry about your grandmother’s illness”. Recognition of the pain is a start. Demonstrating that you at least have the empathy to recognise the damage caused and an acknowledgment that the rules that were violated.
  • “I’m sorry – I will never do it again”. Often people will offer forgiveness for the first transgression, if the transgressor accedes to being held to a higher standard in the future. As the saying goes: “Fool me once, shame on you; fool me twice, shame on me.”
  • “I’m sorry – I am an idiot”. Admitting your own incompetence means you give up some of your reputation in exchange for forgiveness. Tiedens (2001) find that voters liked Bill Clinton more after seeing a video of him apologise about the Lewinsky scandal, but then they became less likely to want to vote for him because they think he is less competent.
  • “I’m sorry – here are some flowers”. The more expensive the better. Offering reparation for the harm done is a way to a pay a tangible cost to make up for the mistake.
  • “I’m sorry – it wasn’t my fault”. This is perhaps the least effective as it is the least costly to say. But it could work if you can prove it wasn’t your fault in a way that is costly to fake.
Nice stuff..

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