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Inequity and Risk Aversion in Sequential Public Good Games

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  • Sabrina Teyssier

Abstract

This paper analyzes which type of intrinsic preferences drive an agent’s behavior in a sequential public good game depending on whether the agent is first or second mover. Theoretical predictions are based on heterogeneity of individuals in terms of social and risk preferences. We modelize preferences according to the inequity aversion model of Fehr and Schmidt (1999) and to the assumption of constant relative risk aversion. Risk aversion is significantly and negatively correlated with the contribution decision of first movers. Second movers with sufficiently high advantageous inequity aversion free-ride less and reciprocate more than others. Both results are predicted by our model. Nevertheless, no effect of disadvantageous inequity aversion of first movers is found in the data while theory predicted it. Our results underline the importance of taking into account the order of agents’ play to correctly understand which type of preferences influences cooperation in voluntary contribution mechanisms. They suggest that individuals’ behavior can be consistent between different experimental games.

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Bibliographic Info

Paper provided by Thurgauer Wirtschaftsinstitut, Universität Konstanz in its series TWI Research Paper Series with number 47.

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Date of creation: 2009
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Handle: RePEc:twi:respas:0047

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Keywords: inequity aversion; risk aversion; public good game; conditional contribution;

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Cited by:
  1. Andrew E. Clark & Conchita D'Ambrosio, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," PSE Working Papers halshs-00967938, HAL.
  2. Eisenkopf, Gerald & Teyssier, Sabrina, 2013. "Envy and loss aversion in tournaments," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 240-255.
  3. Astrid Dannenberg & Thomas Riechmann & Bodo Sturm & Carsten Vogt, 2012. "Inequality aversion and the house money effect," Experimental Economics, Springer, vol. 15(3), pages 460-484, September.
  4. Dannenberg, Astrid & Riechmann, Thomas & Sturm, Bodo & Vogt, Carsten, 2010. "Stability and explanatory power of inequality aversion: an investigation of the house money effect," ZEW Discussion Papers 10-006, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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