The mainstream economic theory assumes that individuals’ preferences are exogenous and self-regarding. However, the laboratory experiments show that in most of the cases, individuals’ preferences exhibit regard for others. It is widely believed that values and norms can foster the other-regarding behaviour by constraining selfishness. This does not imply that selfish behaviour is dead as there is enough experimental evidence that other-regarding individuals use information asymmetry for their personal gains. In this study, while controlling for one aspect of values, that is, religion, we investigate whether individuals behave significantly differently when we control for their religiosity. We examine the behaviours of proposers in a modified ultimatum game after priming their religious identity. Using hadith, saying of the Holy Prophet Muhammad Peace Be Upon Him (PBUH), as a priming instrument, we find that most of the proposers make equitable offers to the responders as compared to the controlled treatment. This is in spite of the fact that the proposers could use information asymmetry regarding the size of the pie for maximizing their private gains. The study suggests that promoting universal values can be beneficial for the promotion of pro-social or other-regarding behaviour.
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Anwar Shah, Karim Khan and Hayat Khan
M. Kabir Hassan
Edited by M. Kabir Hassan
Ajmal Bhatty and Shariq Nisar
Modern takaful practices have evolved in response to reservations against conventional insurance that trades in risk; where operations involve excessive uncertainty (gharar) that is prohibited in shari’ah; and where investments are made in interest bearing instruments and activities that are generally harmful for society and the environment. The chapter discusses the inspirations and factors behind the development of takaful as an alternate mechanism for social protection. It analyses various takaful models that have been developed in response to market needs and shari’ah compliance preference. It also discusses the challenges associated with these models in view of the practical realities where takaful businesses are mostly publically quoted entities and required to bring risk-based capital to support participants’ risk pools. Finally, the chapter analyses some of the key challenges impeding the growth and development of takaful and offers suggestions that can help overcome these challenges.