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Equality, equity and incentives: An experiment

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  • Balafoutas, Loukas
  • Kocher, Martin G.
  • Putterman, Louis
  • Sutter, Matthias

Abstract

We study a fundamental conflict in economic decision-making, the trade-off between equality, equity and incentives, in a new experimental game that nests a voluntary contributions mechanism in a broader spectrum of incentive schemes. In a 2×2 design, we let subjects either vote on or exogenously encounter incentive settings while assigned unequal endowments are either task-determined or random. We find that earned endowments lead to less support for redistribution and less cooperation. Subjects' voting is influenced by egalitarian and equity concerns, in addition to self-interest. Cooperation rates respond rather continuously to incentives.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 60 (2013)
Issue (Month): C ()
Pages: 32-51

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Handle: RePEc:eee:eecrev:v:60:y:2013:i:c:p:32-51

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Keywords: Equality; Efficiency; Incentives; Voluntary contribution mechanism; Experiment;

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Cited by:
  1. R. Kline & F. Galeotti & R. Orsini, 2014. "When Foul Play Seems Fair: Dishonesty as a Response to Violations of Just Deserts," Working Papers wp920, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Oechssler, Jörg, 2011. "Finitely repeated games with social preferences," Working Papers 0515, University of Heidelberg, Department of Economics.
  3. Weng, Qian & Carlsson, Fredrik, 2013. "Cooperation in teams: the role of identity, punishment and endowment distribution," Working Papers in Economics 551, University of Gothenburg, Department of Economics.
  4. Ku, Hyejin & Salmon, Timothy C., 2013. "Procedural fairness and the tolerance for income inequality," European Economic Review, Elsevier, vol. 64(C), pages 111-128.
  5. Großer, Jens & Reuben, Ernesto, 2013. "Redistribution and market efficiency: An experimental study," Journal of Public Economics, Elsevier, vol. 101(C), pages 39-52.
  6. Neil Buckley & Katherine Cuff & Jeremiah Hurley & Stuart Mestelman & Stephanie Thomas & David Cameron, 2013. "Support for Public Provision with Top-Up and Opt-Out: A Controlled Laboratory Experiment," Department of Economics Working Papers 2013-15, McMaster University.

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