IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_7045.html
   My bibliography  Save this paper

Fairness in Winner-Take-All Markets

Author

Listed:
  • Björn Bartling
  • Alexander W. Cappelen
  • Mathias Ekström
  • Erik Ø. Sørensen
  • Bertil Tungodden

Abstract

The paper reports the first experimental study on people’s fairness views on extreme income inequalities arising from winner-take-all reward structures. We find that the majority of participants consider extreme income inequality generated in winner-take-all situations as fair, independent of the winning margin. Spectators appear to endorse a “factual merit” fairness argument for no redistribution: the winner deserves all the earnings because these earnings were determined by his or her performance. Our findings shed light on the present political debate on redistribution, by suggesting that people may object less to certain types of extreme income inequality than commonly assumed.

Suggested Citation

  • Björn Bartling & Alexander W. Cappelen & Mathias Ekström & Erik Ø. Sørensen & Bertil Tungodden, 2018. "Fairness in Winner-Take-All Markets," CESifo Working Paper Series 7045, CESifo.
    • Handle: RePEc:ces:ceswps:_7045
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7045.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Antonio Cabrales & Raffaele Miniaci & Marco Piovesan & Giovanni Ponti, 2010. "Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts," American Economic Review, American Economic Association, vol. 100(5), pages 2261-2278, December.
    2. Ismael Rodriguez-Lara & Luis Moreno-Garrido, 2012. "Self-interest and fairness: self-serving choices of justice principles," Experimental Economics, Springer;Economic Science Association, vol. 15(1), pages 158-175, March.
    3. Tyran, Jean-Robert & Sausgruber, Rupert, 2006. "A little fairness may induce a lot of redistribution in democracy," European Economic Review, Elsevier, vol. 50(2), pages 469-485, February.
    4. 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.
    5. Facundo Alvaredo & Anthony Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1% in International and Historical Perspective," Post-Print halshs-00847231, HAL.
    6. Norman Frohlich & Joe Oppenheimer & Anja Kurki, 2004. "Modeling Other-Regarding Preferences and an Experimental Test," Public Choice, Springer, vol. 119(1_2), pages 91-117, April.
    7. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    8. Thomas Buser & Muriel Niederle & Hessel Oosterbeek, 2014. "Gender, Competitiveness, and Career Choices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1409-1447.
    9. Ruben Durante & Louis Putterman & Joël Weele, 2014. "Preferences For Redistribution And Perception Of Fairness: An Experimental Study," Journal of the European Economic Association, European Economic Association, vol. 12(4), pages 1059-1086, August.
    10. Samak, Anya C., 2013. "Is there a gender gap in preschoolers’ competitiveness? An experiment in the U.S," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 22-31.
    11. Cappelen, Alexander W. & Sørensen, Erik Ø. & Tungodden, Bertil, 2010. "Responsibility for what? Fairness and individual responsibility," European Economic Review, Elsevier, vol. 54(3), pages 429-441, April.
    12. Mankiw, N. Gregory, 2010. "Spreading the Wealth Around: Reflections Inspired by Joe the Plumber," Scholarly Articles 34310083, Harvard University Department of Economics.
    13. Ingvild Almås & Alexander W. Cappelen & Kjell G. Salvanes & Erik Ø. Sørensen & Bertil Tungodden, 2016. "Willingness to Compete: Family Matters," Management Science, INFORMS, vol. 62(8), pages 2149-2162, August.
    14. Alexander W. Cappelen & Astri Drange Hole & Erik Ø Sørensen & Bertil Tungodden, 2007. "The Pluralism of Fairness Ideals: An Experimental Approach," American Economic Review, American Economic Association, vol. 97(3), pages 818-827, June.
    15. N. Gregory Mankiw, 2013. "Defending the One Percent," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 21-34, Summer.
    16. Todd L. Cherry & Peter Frykblom & Jason F. Shogren, 2002. "Hardnose the Dictator," American Economic Review, American Economic Association, vol. 92(4), pages 1218-1221, September.
    17. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 1-41.
    18. N Gregory Mankiw, 2010. "Spreading the Wealth Around: Reflections Inspired by Joe the Plumber," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 36(3), pages 285-298.
    19. Björn Bartling & Roberto A. Weber & Lan Yao, 2015. "Do Markets Erode Social Responsibility?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(1), pages 219-266.
    20. Mollerstrom, Johanna & Reme, Bjørn-Atle & Sørensen, Erik Ø., 2015. "Luck, choice and responsibility — An experimental study of fairness views," Journal of Public Economics, Elsevier, vol. 131(C), pages 33-40.
    21. Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 3-20, Summer.
    22. Uri Gneezy & Aldo Rustichini, 2004. "Gender and Competition at a Young Age," American Economic Review, American Economic Association, vol. 94(2), pages 377-381, May.
    23. Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away From Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(3), pages 1067-1101.
    24. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November.
    25. Armin Falk & Ernst Fehr & Urs Fischbacher, 2003. "On the Nature of Fair Behavior," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 20-26, January.
    26. Jakiela, Pamela, 2015. "How fair shares compare: Experimental evidence from two cultures," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 40-54.
    27. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-858, December.
    28. James Konow, 2000. "Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions," American Economic Review, American Economic Association, vol. 90(4), pages 1072-1091, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alexander W Cappelen & Johanna Mollerstrom & Bjørn-Atle Reme & Bertil Tungodden, 2022. "A Meritocratic Origin of Egalitarian Behaviour," The Economic Journal, Royal Economic Society, vol. 132(646), pages 2101-2117.
    2. Fehr, Dietmar & Rau, Hannes & Trautmann, Stefan T. & Xu, Yilong, 2020. "Inequality, fairness and social capital," European Economic Review, Elsevier, vol. 129(C).
    3. Tobias König & Dorothea Kübler & Lydia Mechtenberg & Renke Schmacker, 2023. "Fairness in Matching Markets: Experimental Evidence," Rationality and Competition Discussion Paper Series 442, CRC TRR 190 Rationality and Competition.
    4. Granaglia, Elena, 2019. "Can market inequalities be justified? The intrinsic shortcomings of meritocracy," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 284-290.
    5. Schwaiger, Rene & Huber, Jürgen & Kirchler, Michael & Kleinlercher, Daniel & Weitzel, Utz, 2022. "Unequal opportunities, social groups, and redistribution: Evidence from Germany," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 100(C).
    6. Dong, Zhiqiang & Zhang, Yanren, 2022. "Tournaments as coordination devices: Theory and experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 100(C).
    7. Peter Andre, 2021. "Shallow Meritocracy: An Experiment on Fairness Views," ECONtribute Discussion Papers Series 115, University of Bonn and University of Cologne, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ingvild Almås & Alexander W. Cappelen & Bertil Tungodden, 2020. "Cutthroat Capitalism versus Cuddly Socialism: Are Americans More Meritocratic and Efficiency-Seeking than Scandinavians?," Journal of Political Economy, University of Chicago Press, vol. 128(5), pages 1753-1788.
    2. Grundmann, Susanna, 2020. "Do just deserts and competition shape patterns of cheating?," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-79-20, University of Passau, Faculty of Business and Economics.
    3. Alexander W Cappelen & Karl Ove Moene & Siv-Elisabeth Skjelbred & Bertil Tungodden, 2023. "The Merit Primacy Effect," The Economic Journal, Royal Economic Society, vol. 133(651), pages 951-970.
      • Alexander Cappelen & Karl Ove Moene & Siv-Elisabeth Skjelbred & Bertil Tungodden, 2017. "The Merit Primacy Effect," Working Papers 2017-047, Human Capital and Economic Opportunity Working Group.
    4. Sophie Harnay & Elisabeth Tovar, 2017. "Obeying vs. resisting unfair laws. A structural analysis of the internalization of collective preferences on redistribution using classification trees and random forests," EconomiX Working Papers 2017-34, University of Paris Nanterre, EconomiX.
    5. Alexander W Cappelen & Johanna Mollerstrom & Bjørn-Atle Reme & Bertil Tungodden, 2022. "A Meritocratic Origin of Egalitarian Behaviour," The Economic Journal, Royal Economic Society, vol. 132(646), pages 2101-2117.
    6. Buser, Thomas & Cappelen, Alexander & Tungodden, Bertil, 2021. "Fairness and Willingness to Compete," Discussion Paper Series in Economics 8/2021, Norwegian School of Economics, Department of Economics.
    7. Vanessa Valero, 2022. "Redistribution and beliefs about the source of income inequality," Experimental Economics, Springer;Economic Science Association, vol. 25(3), pages 876-901, June.
    8. Eisenkopf, Gerald & Fischbacher, Urs & Föllmi-Heusi, Franziska, 2013. "Unequal opportunities and distributive justice," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 51-61.
    9. Sophie Harnay & Élisabeth Tovar, 2017. "Obeying vs. resisting unfair laws. A structural analysis of the internalization of collective preferences on redistribution using classification trees and random forests," Working Papers hal-04141635, HAL.
    10. Deffains, Bruno & Espinosa, Romain & Thöni, Christian, 2016. "Political self-serving bias and redistribution," Journal of Public Economics, Elsevier, vol. 134(C), pages 67-74.
    11. Akbaş, Merve & Ariely, Dan & Yuksel, Sevgi, 2019. "When is inequality fair? An experiment on the effect of procedural justice and agency," Journal of Economic Behavior & Organization, Elsevier, vol. 161(C), pages 114-127.
    12. Breitmoser, Yves & Vorjohann, Pauline, 2018. "Welfare-Based Altruism," Rationality and Competition Discussion Paper Series 89, CRC TRR 190 Rationality and Competition.
    13. Ismael Rodriguez-Lara & Luis Moreno-Garrido, 2012. "Modeling Inequity Aversion in a Dictator Game with Production," Games, MDPI, vol. 3(4), pages 1-12, October.
    14. Bejarano, Hernan & Gillet, Joris & Lara, Ismael Rodríguez, 2021. "When the rich do (not) trust the (newly) rich: Experimental evidence on the effects of positive random shocks in the trust game," OSF Preprints wmejt, Center for Open Science.
    15. Ubeda, Paloma, 2014. "The consistency of fairness rules: An experimental study," Journal of Economic Psychology, Elsevier, vol. 41(C), pages 88-100.
    16. Paetzel, Fabian & Sausgruber, Rupert, 2018. "Cognitive ability and in-group bias: An experimental study," Journal of Public Economics, Elsevier, vol. 167(C), pages 280-292.
    17. Cetre, Sophie & Lobeck, Max & Senik, Claudia & Verdier, Thierry, 2019. "Preferences over income distribution: Evidence from a choice experiment," Journal of Economic Psychology, Elsevier, vol. 74(C).
    18. Cappelen, Alexander W. & Cappelen, Cornelius & Tungodden, Bertil, 2018. "Second-best fairness under Limited information: The trade-off between false positives and false negatives," Discussion Paper Series in Economics 18/2018, Norwegian School of Economics, Department of Economics.
    19. Grimalday, Gianluca & Karz, Anirban & Proto, Eugenio, 2012. "Everyone Wants a Chance: Initial Positions and Fairness in Ultimatum Games," CAGE Online Working Paper Series 93, Competitive Advantage in the Global Economy (CAGE).
    20. Galeotti, Fabio & Kline, Reuben & Orsini, Raimondello, 2017. "When foul play seems fair: Exploring the link between just deserts and honesty," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 451-467.

    More about this item

    Keywords

    winner-take-all reward structures; fairness; income inequality;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_7045. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.