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Equality, Equity and Incentives: An Experiment

  • Balafoutas, Loukas

    ()

    (University of Innsbruck)

  • Kocher, Martin G.

    ()

    (University of Munich)

  • Putterman, Louis

    ()

    (Brown University)

  • Sutter, Matthias

    ()

    (University of Cologne)

We devise a new experimental game by nesting a voluntary contributions mechanism in a broader spectrum of incentive schemes. With it, we study tensions between egalitarianism, equity concerns, self-interest, and the need for incentives. In a 2x2 design, subjects either vote on or exogenously encounter incentive settings while assigned unequal incomes that are either task-determined or random. We find subjects’ voting to be mainly self-interested but also influenced by egalitarian and equity concerns, which sometimes cut in opposite directions. Contributions, which seem mainly determined by boundedly rational responses to incentives, are influenced by egalitarian, equity and strategic considerations.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5204.

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Length: 61 pages
Date of creation: Sep 2010
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Handle: RePEc:iza:izadps:dp5204
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