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Examining the Role of Fairness in High Stakes Allocation Decisions

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  • Todd L. Cherry
  • John A. List

Abstract

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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  • Todd L. Cherry & John A. List, 2004. "Examining the Role of Fairness in High Stakes Allocation Decisions," Working Papers 04-01, Department of Economics, Appalachian State University.
  • Handle: RePEc:apl:wpaper:04-01
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    1. 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.
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    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. 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.
    8. 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.
    9. Gary E Bolton & Axel Ockenfels, 1997. "A Theory of Equity, Reciprocity, and Competition," Levine's Working Paper Archive 1889, David K. Levine.
    10. John List & Todd Cherry, 2000. "Learning to Accept in Ultimatum Games: Evidence from an Experimental Design that Generates Low Offers," Experimental Economics, Springer;Economic Science Association, vol. 3(1), pages 11-29, June.
    11. 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.
    12. 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 653-660, June.
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