Will Joe the Plumber envy Bill Gates? The impact of both absolute and relative differences on interdependent preferences
AbstractWe investigate experimentally the impact of unflattering social comparisons on individuals’ behaviour. More precisely, we examine the relationship between the satisfaction subjects derive from social comparisons and subjects’ decisions to reduce others’ income. In our experiment, subjects are randomly paired and receive an endowment. Then subjects have to report their satisfaction level after being informed of their own endowment and of their opponent’s endowment. Then they can choose, or not, to reduce their opponent’s endowment incurring a personal cost. We observe: (1) most people report their satisfaction to be negatively affected by learning others’ endowments; (2) destructive decisions are predominantly undertaken by dissatisfied subjects; (3) satisfaction is negatively affected by absolute difference (difference between subjects’ endowments measured in absolute terms) and (4) relative difference between subjects’ endowments modulates subjects’ negative behaviour.
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Bibliographic InfoPaper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 09-26.
Length: 24 pages
Date of creation: Dec 2009
Date of revision: Dec 2009
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-EXP-2010-01-10 (Experimental Economics)
- NEP-SOC-2010-01-10 (Social Norms & Social Capital)
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