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The Impact of Fairness on Decision Making - An Analysis of Different Video Experiments

  • Heike Hennig-Schmidt


Experimentally observed deviations of behavior from game theoretic predictions suggest that fairness does influence decision making. Fairness in the sense of equality has become an essential element of economic models aiming at explaining actual behavior (cf. Fehr and Schmidt, 1999; Bolton and Ockenfels, 2000). In this paper I will argue that equality is not the only fairness norm to be taken into account. More equity norms than equality exist, including inequality of payoffs. Since inequitable payoff allocations are advantageous for the one player and disadvantageous for the other, subjects may fall prey to a self-serving bias in their fairness perceptions. Opponents may adhere to different conceptions of fairness making agreement impossible. Using the video method (Hennig-Schmidt, 1999) I further show in a bargaining experiment that behavior is goal-oriented. Fairness criteria based on equity norms guide the formation and adaptation of aspiration levels.

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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse14_2001.

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Length: 12
Date of creation: Sep 2000
Date of revision: Feb 2002
Handle: RePEc:bon:bonedp:bgse14_2001
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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  1. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
  2. Babcock, Linda, et al, 1995. "Biased Judgments of Fairness in Bargaining," American Economic Review, American Economic Association, vol. 85(5), pages 1337-43, December.
  3. Gary E Bolton & Axel Ockenfels, 1997. "A Theory of Equity, Reciprocity, and Competition," Levine's Working Paper Archive 1889, David K. Levine.
  4. Linda Babcock & George Loewenstein, 1997. "Explaining Bargaining Impasse: The Role of Self-Serving Biases," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 109-126, Winter.
  5. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
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