The psychology of competition

From anthropologist Joseph Henrich’s recent book The WEIRDest People In the World: How the West Became Psychologically Peculiar and Particularly Prosperous:

That differing effects of intergroup vs. within-group competition help us understand why “competition” has both positive and negative connotations. Unregulated and unmonitored, firms facing intense intergroup competition will start violently sabotaging each other while exploiting the powerless. We know this because it has happened repeatedly over many centuries, and continues today. Nevertheless, when properly yoked, moderate levels of nonviolent intergroup competition can strengthen impersonal trust and cooperation. Similarly, extreme forms of within-group competition encourage selfish behavior, envy, and zero-sum thinking. Yet when disciplined by intergroup competition, moderate levels of within-group competition can inspire perseverance and creativity.

p. 349

Seems about right. But what I really wanted to post here was Henrich’s summary of some research on competition and pro-social psychology:

However, because growing firms often hire residentially and relationally mobile individuals, greater interfirm competition should strengthen impersonal prosociality, not social embeddedness and interprersonal prosociality. As more people spend much of their day in more cooperative environments, governed by impartial norms, they should become more cooperative and trusting with anonymous others, even outside of work…

…Using data on the competitiveness of 50 different German industries, Patrick’s team asked a simple question: What happens to a person’s trust when they move from an industry with stronger interfirm competition to one with weaker competition? Remember, we are following the same individuals through time.

The results of this analysis reveal that when people move into a more competitive industry, their interpersonal trust tends to go up. The results imply that if people move from a hypothetical industry in which three firms divide up the market into one in which four firms divide it up, they will be about 4 percentile points more likely to say “most people can be trusted” on the GTQ. But, when they move into a less competitive industry, their trust goes down (on average).

p. 341-344

There are a couple other studies described, using different methods but finding the same effect, and there’s more on markets and prosocial attitudes on p. 240.

I found myself wondering about this in the context of current debates around industry concentration and competition in the U.S. Industries are becoming more concentrated, but there’s still disagreement among experts over the extent to which this implies a decline in competition. If you buy into the story Henrich is telling here for a second, you could ask: does someone who joins Google or Amazon today become more or less trusting of strangers? And might that tell us something about whether these highly concentrated tech industries are or aren’t competitive?

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