Working Paper: CEPR ID: DP6853
Authors: Chaim Fershtman; Uri Gneezy; John List
Abstract: Models of inequity aversion and fairness have dominated the behavioural economics landscape in the last decade. This study gathers data from 240 subjects exposed to variants of two of the major experimental games - dictator and trust - that are employed to provide important empirical content to these models. With a set of simple laboratory treatments that focus on a manipulation of an important feature of real markets, competition over resources, we show that extant behavioural models are unable to explain data drawn from realistic manipulations of either game. Our empirical results highlight that if placed in an environment wherein socially acceptable actions provide one person with a greater portion of the rents, people will put forth extra effort to secure those rents, to the detriment of the other player. In this manner, when one can earn more than the other player through actions deemed customary, people reveal a preference for equity aversion, not inequity aversion. We propose an alternative modelling approach that can explain these data as well as accommodate other major data patterns observed in the experimental literature.
Keywords: equity aversion; social preferences; social status
JEL Codes: C91; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| socially acceptable actions allow one player to earn more than another (Z13) | individuals exert extra effort to secure those rents (R21) |
| comparison treatment of the dictator game (C72) | subjects invest more time and effort compared to the baseline treatment (C92) |
| 75% of dictators in the baseline treatment opt for an equal split (C72) | effort levels are significantly higher in the comparison treatment (D29) |
| comparison treatment in the trust game (C72) | proposers invest significantly more effort than those in the baseline treatment (D29) |
| adherence to social norms (Z13) | behavior that appears altruistic (D64) |
| social norms (Z13) | decision-making (D70) |