Equitable Allocations in Experimental Bargaining Games: Inequality Aversion versus Efficiency
In this paper, we report on a series of free-form bargaining experiments in which two players have to distribute four indivisible goods among themselves. In one treatment the monetary payoffs associated with each bundle of goods are common knowledge; in a second treatment only the ordinal ranking of the bundles is given. We find that in both cases, the following qualitative rule yields a good explanation of individual behavior: First determine the most equal distribution, then find a Pareto improvement provided that this does not create “too much” inequality. In the ordinal treatment, individuals apparently use the ranks in the respective preference orderings over bundles as a substitute for the unknown monetary value. Interestingly, we find much less Pareto-damaging behavior due to inequality aversion in the ordinal treatment.
|Date of creation:||Sep 2004|
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- 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.
- Dorothea Herreiner & Clemens Puppe, 2009.
"Envy Freeness in Experimental Fair Division Problems,"
Theory and Decision,
Springer, vol. 67(1), pages 65-100, July.
- Dorothea K. Herreiner & Clemens Puppe, 2004. "Envy Freeness in Experimental Fair Division Problems," Bonn Econ Discussion Papers bgse28_2004, University of Bonn, Germany.
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