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Information Asymmetry and Beliefs Reveal Self Interest Not Fairness

Author

Listed:
  • Andrea Guido

    (Institute for Futures Studies
    LABSS - CNR)

  • Alejandro Martinez-Marquina

    (Stanford University)

  • Ryan Rholes

    (Texas A&M University)

Abstract

Decades of research suggests that other-regarding preferences explain deviations from the self-interested behavior predicted by standard theory. However, the vast majority of this evidence considers strategic interactions when agents are fully informed and economic conditions are stable. We relax both of these conditions by expanding the widely used gift-exchange game to include permanent endowment shocks and information frictions. Varying information conditions reveals that a large fraction of the behavior previously attributed to fairness and reciprocity is actually driven by self-interest motives and intentions-based concerns. Counter-intuitively, we find that information frictions do not always benefit the more informed party.

Suggested Citation

  • Andrea Guido & Alejandro Martinez-Marquina & Ryan Rholes, 2020. "Information Asymmetry and Beliefs Reveal Self Interest Not Fairness," GREDEG Working Papers 2020-53, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2020-53
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    More about this item

    Keywords

    fairness; expectations; beliefs; information; wage rigidity; labor market; business cycle; wages;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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