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(Not) Everyone Can Be a Winner - The Role of Payoff Interdependence for Redistribution

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  • Sebastian Schaube
  • Louis Strang

Abstract

How does payoff interdependence affect preferences for redistribution? We experimentally implement a zero-sum setting and one in which everyone can be simultaneously successful. Across these, we compare redistribution given an identical level of inequality. First, two subjects’ performances in a real-effort task translate into chances of winning a prize. Across treatments, we vary the interdependence of payoffs: either there is only a single prize or both subjects can potentially win a prize at the same time. Afterwards, a spectator can redistribute the prize money. If payoffs are not directly interdependent, the average amount redistributed decreases by 14-22%. In additional treatments, solely performance determines the prize allocation. Nevertheless, the impact of payoff interdependence remains unchanged. Comparing the settings with and without randomness, we find that its mere presence increases redistribution, even though there is no uncertainty about the (relative) performance of the two subjects.

Suggested Citation

  • Sebastian Schaube & Louis Strang, 2019. "(Not) Everyone Can Be a Winner - The Role of Payoff Interdependence for Redistribution," CRC TR 224 Discussion Paper Series crctr224_2019_097, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2019_097
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp097
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    More about this item

    Keywords

    Redistribution; Social preferences; Fairness; Lab experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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