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Fairness Under Risk: Insights from Dictator Games

Author

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  • Vitezslav Babicky

Abstract

Recent theories of fairness (e.g., Bolton & Ockenfels, 2000; Fehr & Schmidt, 1999) have typically used the assumption of ex ante known pie size. Here I explore theoretically the ramifications of pie size being unknown ex ante. Using a simple allocation problem known as dictator game, I find that attitude to fairness is systematically and intuitively related to risk and risk attitude. Results from informal experiments support the model proposed here.

Suggested Citation

  • Vitezslav Babicky, 2003. "Fairness Under Risk: Insights from Dictator Games," CERGE-EI Working Papers wp217, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp217
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    File URL: http://www.cerge-ei.cz/pdf/wp/Wp217.pdf
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    References listed on IDEAS

    as
    1. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    2. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    3. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    4. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
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    Cited by:

    1. Alexander W. Cappelen & James Konow & Erik ?. S?rensen & Bertil Tungodden, 2013. "Just Luck: An Experimental Study of Risk-Taking and Fairness," American Economic Review, American Economic Association, vol. 103(4), pages 1398-1413, June.
    2. Silvester Van Koten & Andreas Ortmann & Vitezslav Babicky, 2013. "Fairness in Risky Environments: Theory and Evidence," Games, MDPI, vol. 4(2), pages 1-35, May.

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    More about this item

    Keywords

    inequity aversion; dictator game; risk; expected utility; constant relative risk-aversion;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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