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Just Luck: An Experimental Study of Risk Taking and Fairness

  • Cappelen, Alexander W.


    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Konow, James


    (Loyola Marymount University)

  • Sørensen, Erik Ø.


    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Tungodden, Bertil


    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Choices involving risk significantly a ect the distribution of income and wealth in society, but there is probably no more contentious question of justice than how to allocate the gains and losses that inevitably result from risky choices. This paper reports the results from the first experiment, to our knowledge, to study fairness views about risk-taking, where the main aim is to examine whether people's fairness considerations mainly focus on ex ante opportunities or ex post outcomes. The experiment was a two stage dictator game where the distribution phase was preceded by a risk-taking phase. Our analysis provides four main findings. First, we show that even though many participants focus exclusively on ex ante opportunities, the majority favors some redistribution ex post. Second, we find that, among the participants who redistribute ex post, a substantial share make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. Third, we show that the appeal of the ex ante view is independent of how costly it is to avoid exposure to risk. Fourth, we find that the choices of stakeholders and impartial spectators reflect the same set of fairness considerations.

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Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 4/2010.

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Length: 19 pages
Date of creation: 01 Feb 2010
Date of revision:
Handle: RePEc:hhs:nhheco:2010_004
Contact details of provider: Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 959 277
Fax: 5595 9100
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