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Risk and Inequality Aversion in Social Dilemmas

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Author Info
Brice Magdalou () (CEREGMIA, Université des Antilles et de la Guyane, campus de Schoelcher, B.P. 7209, F-97275 Schoelcher Cédex, France.)
Dimitri Dubois () (LAMETA, CNRS, Université Montpellier 1, CNRS, avenue de la mer, site Richter, C.S. 79606, F-34960 Montpellier Cédex 2, France.)
Phu Nguyen-Van () (BETA, CNRS, Université de Strasbourg, 61 avenue de la Forêt Noire, F-67085 Strasbourg Cédex, France.)

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Abstract

We experimentally investigate cooperative behavior in a social dilemma situation, where the socially efficient outcome may be encouraged by risk aversion and/or inequality aversion.The first part of our experiment is devoted to the elicitation of subjects' aversion profile, taking care to not confuse the two dimensions. Subjects are then grouped by three according to their aversion profiles, and interact in a repeated social dilemma game. In this game, agents are characterised by a social status so that higher the agent's status, higher will be her earnings. Cooperation is costly for a majority of agents at each period, but statuses can be reversed in future periods. We show that cooperation is strongly influenced by the group's aversion profile. Groups averse in both dimensions cooperate more than groups averse in only one dimension. Moreover cooperation seems to be more affected by risk aversion, whereas one might interpret cooperative behavior as an inequality averse or altruistic attitude.

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Publisher Info
Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 09.

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Length: 25 pages
Date of creation: Jan 2009
Date of revision: Feb 2009
Handle: RePEc:dpc:wpaper:0909

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Related research
Keywords: Risk aversion; Inequality aversion; Social preferences; Social dilemmas; Experimental economics;

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Find related papers by JEL classification:
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

References listed on IDEAS
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  1. Amiel, Yoram & Creedy, John & Hurn, Stan, 1999. " Measuring Attitudes towards Inequality," Scandinavian Journal of Economics, Blackwell Publishing, vol. 101(1), pages 83-96, March. [Downloadable!] (restricted)
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  7. Rothschild, Michael & Stiglitz, Joseph E., 1973. "Some further results on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 188-204, April. [Downloadable!] (restricted)
    Other versions:
  8. 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. [Downloadable!]
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    Other versions:
  11. Simon Gächter & Christian Thöni, 2005. "Social Learning and Voluntary Cooperation Among Like-Minded People," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 303-314, 04/05. [Downloadable!] (restricted)
  12. Yoram Kroll & Liema Davidovitz, 2003. "Inequality Aversion versus Risk Aversion," Economica, London School of Economics and Political Science, vol. 70(277), pages 19-29, February.
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