Abstract
This paper investigates the neural mechanism that underlies the effect of group identity on hold-up problems. The behavioral results indicated that the investment rate among members of the in-group was significantly higher than that of the out-group. In comparison to the NoChat treatment, the Chat treatment resulted in significantly lower offers for both in-group and out-group members. The event-related potentials (ERP) results demonstrated the presence of a distinct N2 component in the frontal midline of the brain when investment decisions were made for both in-group and out-group members. During the offer decision-making stage, the P3 peak amplitude was significantly larger when interacting with in-group members compared to the out-group members. The event-related potentials oscillations (ERO) results indicated that when investment decisions were made for in-group members in the NoChat treatment, the beta band (18-28 Hz, 250-350 ms) power was more pronounced than when decisions were made for out-group members. In the NoChat treatment, offer decisions for in-group members yielded a more pronounced difference in beta band (15-20 Hz, 200-300 ms) power when compared to out-group members. Evidence from this study suggests that group identity can reduce the hold-up problem and corroborates the neural basis of group identity.