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Fairness versus efficiency: An experimental study of (mutual) gift giving

  • Guth, Werner
  • Kliemt, Hartmut
  • Ockenfels, Axel

Fairness is a strong concern as shown by the robust results of dictator giving and ultimatum experiments. Efficiency, measured by the sum of individual payoffs, is another potential concern in games such as the prisoners' dilemma and public good provision games. In our experiment participants can increase efficiency by gift giving at the cost of reducing their own monetary payoff. In the one-sided treatment this is only possible for one of the two partners. The two-sided treatment allows for mutual gift giving. In both cases decisions can be conditioned on whether there is or there is not an efficiency gain by gift giving. The overall conclusion from our results is that striving for efficiency is constrained by equity concerns that are less stringent in mutual exchanges than in onesided gift-relationships.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 50 (2003)
Issue (Month): 4 (April)
Pages: 465-475

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Handle: RePEc:eee:jeborg:v:50:y:2003:i:4:p:465-475
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
  2. Gary Charness & Matthew Rabin, 2001. "Social Preferences: Some Simple Tests and a New Model," General Economics and Teaching 0012002, EconWPA.
  3. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  4. Gary E. Bolton & Rami Zwick & Elena Katok, 1998. "Dictator game giving: Rules of fairness versus acts of kindness," International Journal of Game Theory, Springer, vol. 27(2), pages 269-299.
  5. James Andreoni, 2001. "Giving According to GARP," Theory workshop papers 339, UCLA Department of Economics.
  6. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  7. Selten, Reinhard & Ockenfels, Axel, 1998. "An experimental solidarity game," Journal of Economic Behavior & Organization, Elsevier, vol. 34(4), pages 517-539, March.
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