AbstractModels of inequity aversion and fairness have dominated the behavioural economics landscape in the last decade. This study gathers data from 240 subjects exposed to variants of two of the major experimental games - dictator and trust - that are employed to provide important empirical content to these models. With a set of simple laboratory treatments that focus on a manipulation of an important feature of real markets, competition over resources, we show that extant behavioural models are unable to explain data drawn from realistic manipulations of either game. Our empirical results highlight that if placed in an environment wherein socially acceptable actions provide one person with a greater portion of the rents, people will put forth extra effort to secure those rents, to the detriment of the other player. In this manner, when one can earn more than the other player through actions deemed customary, people reveal a preference for equity aversion, not inequity aversion. We propose an alternative modelling approach that can explain these data as well as accommodate other major data patterns observed in the experimental literature.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6853.
Date of creation: Jun 2008
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Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-27 (All new papers)
- NEP-EVO-2008-06-27 (Evolutionary Economics)
- NEP-EXP-2008-06-27 (Experimental Economics)
- NEP-UPT-2008-06-27 (Utility Models & Prospect Theory)
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