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Examining the Role of Fairness in High Stakes Allocation Decisions

  • Todd L. Cherry
  • John A. List

Recent experimental evidence has led to a debate about the nature of utility functions in which people are concerned about the amount others earn, and what factors heighten or diminish social preference. We explore fairness by examining behavior across three variants of the dictator game. Using data from nearly 200 dictators allocating as much as $100 each, we observe that fairness considerations are very powerful—when subjects could reasonably believe that disproportionately low offers are “fair”, only 8-12 percent of dictators make positive offers. Examining the comparative static results from these allocation decisions, we find that recent theoretical models of inequality do a respectable job of explaining the data patterns.

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File URL: http://econ.appstate.edu/RePEc/pdf/wp0401.pdf
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Paper provided by Department of Economics, Appalachian State University in its series Working Papers with number 04-01.

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Date of creation: 2004
Date of revision:
Handle: RePEc:apl:wpaper:04-01
Contact details of provider: Postal: Thelma C. Raley Hall, Boone, North Carolina 28608
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Web page: http://www.business.appstate.edu/departments/economics/

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  1. 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.
  2. Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
  3. Gary E Bolton & Axel Ockenfels, 1997. "A Theory of Equity, Reciprocity, and Competition," Levine's Working Paper Archive 1889, David K. Levine.
  4. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
  5. Forsythe Robert & Horowitz Joel L. & Savin N. E. & Sefton Martin, 1994. "Fairness in Simple Bargaining Experiments," Games and Economic Behavior, Elsevier, vol. 6(3), pages 347-369, May.
  6. Nelson, William Jr., 2002. "Equity or intention: it is the thought that counts," Journal of Economic Behavior & Organization, Elsevier, vol. 48(4), pages 423-430, August.
  7. Hoffman, Elizabeth & McCabe, Kevin & Smith, Vernon L, 1996. "Social Distance and Other-Regarding Behavior in Dictator Games," American Economic Review, American Economic Association, vol. 86(3), pages 653-60, June.
  8. John List & Todd Cherry, 2000. "Learning to Accept in Ultimatum Games: Evidence from an Experimental Design that Generates Low Offers," Experimental Economics, Springer, vol. 3(1), pages 11-29, June.
  9. David K Levine, 1997. "Modeling Altruism and Spitefulness in Experiments," Levine's Working Paper Archive 2047, David K. Levine.
  10. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
  11. Eckel, Catherine C. & Grossman, Philip J., 1996. "Altruism in Anonymous Dictator Games," Games and Economic Behavior, Elsevier, vol. 16(2), pages 181-191, October.
  12. Bruno S. Frey & Iris Bohnet, 1999. "Social Distance and Other-Regarding Behavior in Dictator Games: Comment," American Economic Review, American Economic Association, vol. 89(1), pages 335-339, March.
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