Market experience is a reference point in judgments of fairness
AbstractPeople's desire for fair transactions can play an important role in negotiations, organizations, and markets. In this paper, we show that markets can also shape what people consider to be a fair transaction. We propose a simple and generally-applicable model of path-dependent fairness preferences, in which past experiences shape preferences, and we experimentally test the model's predictions. We find that previous exposure to competitive pressure substantially and persistently reduces subjects' fairness concerns, making them more likely to accept low offers. Consistent with our theory, we also find that past experience has little effect on subjects' inclinations to treat others unfairly.
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Bibliographic InfoPaper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 128.
Date of creation: Jul 2013
Date of revision:
Social preferences; reference points; fairness; bargaining;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-CBE-2013-07-28 (Cognitive & Behavioural Economics)
- NEP-EVO-2013-07-28 (Evolutionary Economics)
- NEP-EXP-2013-07-28 (Experimental Economics)
- NEP-HME-2013-07-28 (Heterodox Microeconomics)
- NEP-HPE-2013-07-28 (History & Philosophy of Economics)
- NEP-UPT-2013-07-28 (Utility Models & Prospect Theory)
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