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When Equality Trumps Reciprocity: Evidence from a Laboratory Experiment

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  • Xiao, Erte
  • Bicchieri, Cristina

Abstract

Inequity aversion and reciprocity have been identified as two primary motivations underlying human decision making. However, because income and wealth inequality exist to some degree in all societies, these two key motivations can point to different decisions. In particular, when a beneficiary is less wealthy than a benefactor, a reciprocal action can lead to greater inequality. In this paper we report data from a trust game variant where trustees’ responses to kind intentions generate inequality in favor of investors. In relation to a standard trust game treatment where trustees’ responses reduce inequality, the proportion of non-reciprocal decisions is twice as large when reciprocity promotes inequality. Moreover, we find investors expect that this will be the case. Overall, although both motives clearly play a role, we found strong evidence for inequality aversion. Our results call attention to the potential importance of inequality in principal-agent relationships, and have important implications for designing policies aimed at promoting cooperation.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9375.

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Date of creation: 01 Jun 2008
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Handle: RePEc:pra:mprapa:9375

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  1. Johansson-Stenman, Olof & Mahmud, Minhaj & Martinsson, Peter, 2004. "Does stake size matter in trust games?," Working Papers in Economics, University of Gothenburg, Department of Economics 140, University of Gothenburg, Department of Economics.
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  8. Bicchieri, Cristina & Erte, Xiao, 2007. "Do the right thing: But only if others do so," MPRA Paper 4609, University Library of Munich, Germany.
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  18. Cox, James C., 2004. "How to identify trust and reciprocity," Games and Economic Behavior, Elsevier, Elsevier, vol. 46(2), pages 260-281, February.
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Cited by:
  1. Bonein, Aurélie & Serra, Daniel, 2009. "Gender pairing bias in trustworthiness," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 38(5), pages 779-789, October.

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