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The Impact of Fairness on Decision Making - An Analysis of Different Video Experiments

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Author Info
Heike Hennig-Schmidt ()
Abstract

Experimentally observed deviations of behavior from game theoretic predictions suggest that fairness does influence decision making. Fairness in the sense of equality has become an essential element of economic models aiming at explaining actual behavior (cf. Fehr and Schmidt, 1999; Bolton and Ockenfels, 2000). In this paper I will argue that equality is not the only fairness norm to be taken into account. More equity norms than equality exist, including inequality of payoffs. Since inequitable payoff allocations are advantageous for the one player and disadvantageous for the other, subjects may fall prey to a self-serving bias in their fairness perceptions. Opponents may adhere to different conceptions of fairness making agreement impossible. Using the video method (Hennig-Schmidt, 1999) I further show in a bargaining experiment that behavior is goal-oriented. Fairness criteria based on equity norms guide the formation and adaptation of aspiration levels.

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File URL: ftp://web.bgse.uni-bonn.de/pub/RePEc/bon/bonedp/bgse14_2001.pdf
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Publisher Info
Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse14_2001.

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Length: 12
Date of creation: Sep 2000
Date of revision: Feb 2002
Handle: RePEc:bon:bonedp:bgse14_2001

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 9221
Web page: http://www.bgse.uni-bonn.de/index.php?id=494

For technical questions regarding this item, or to correct its listing, contact: (Daniel Park).

Related research
Keywords: experimental economics; video experiments; fairness; equity principle; self-serving bias; aspiration levels; decision making;

Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers iewwp004, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  2. Gary E Bolton & Axel Ockenfels, 1997. "A Theory of Equity, Reciprocity, and Competition," Levine's Working Paper Archive 1889, David K. Levine. [Downloadable!]
  3. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July. [Downloadable!] (restricted)
  4. Babcock, Linda, et al, 1995. "Biased Judgments of Fairness in Bargaining," American Economic Review, American Economic Association, vol. 85(5), pages 1337-43, December. [Downloadable!] (restricted)
  5. Babcock, Linda & Loewenstein, George, 1997. "Explaining Bargaining Impasse: The Role of Self-Serving Biases," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 109-26, Winter. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ronald Bosman & Heike Hennig-Schmidt & Frans vanWinden, 2002. "Exploring Group Behavior in a Power-to-Take Video Experiment," Bonn Econ Discussion Papers bgse7_2002, University of Bonn, Germany, revised May 2002. [Downloadable!]
  2. Heike Hennig-Schmidt & Zhu-Yu Li & Chaoliang Yang, 2004. "Why People Reject Advantageous Offers – Non-monotone Strategies in Ultimatum Bargaining," Bonn Econ Discussion Papers bgse22_2004, University of Bonn, Germany. [Downloadable!]
  3. Lange, Andreas & Löschel, Andreas & Vogt, Carsten & Ziegler, Andreas, 2007. "On the Self-serving Use of Equity Principles in International Climate Negotiations," ZEW Discussion Papers 07-025, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  4. Martin Beckenkamp & Heike Hennig-Schmidt & Frank P. Maier-Rigaud, 2007. "Cooperation in Symmetric and Asymmetric Prisoner's Dilemma Games," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2006_25, Max Planck Institute for Research on Collective Goods. [Downloadable!]
  5. Asheim, Geir B. & Helland, Leif & Hovi, Jon & Hoyland, Bjorn, 2008. "Self-serving Dictators," Memorandum 26/2008, Oslo University, Department of Economics. [Downloadable!]
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