The Economic Impact of Envy: Evidence from a Multi-Period Game with Attacks and Insurance

We report results from a multi-period game designed to stimulate feelings of envy. There are a number of important features of our game that distinguish it from previous games used to examine envy. A unique and important feature of our design is that it addresses the two negative effects of envy: the wasteful expenditure of resources in an attempt to harm others and the wasteful use of resources by those envied in an attempt to protect themselves. We find that as wasteful as attacks are, spending on protection against attacks, while individually rational, results in even more waste. Players purchase insurance at twice the rate of attacks. Our multiperiod game permits us to examine how subjects' behaviour motivated by envy or the threat of envious actions changes over time. We report evidence consistent with players learning that envious feelings are wasteful and are less satisfying than the foregone monetary rewards.