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On the Context-Dependency of Inequality Aversion - Experimental Evidence and a Stylized Model -

  • Agnes Bäker

    ()

    (University of Tübingen, Faculty of Economics and Social Sciences, Germany)

  • Werner Güth

    ()

    (Max Planck Institute of Economics, Strategic Interaction Groupm Jena)

  • Kerstin Pull

    ()

    (University of Tübingen, Faculty of Economics and Social Sciences, Germany)

  • Manfred Stadler

    ()

    (University of Tübingen, Faculty of Economics and Social Sciences, Germany)

We consider three-person envy games with a proposer, a responder, and a dummy player. In this class of games, the proposer, rather than allocating a constant pie, chooses the pie size which the responder can then accept or reject while the dummy player can only refuse his own share. While the agreement payoffs for the responder and the dummy are exogenously given, the proposer acts as the residual claimant who - in case of responder acceptance - receives whatever is left after the two exogenously given agreement payoffs have been deducted from the pie. Consistent with earlier findings from three-person generosity games, we find inequality aversion to be strongly context-dependent and affected by the (in)equality of exogenously given agreement payoffs. Motivated by these findings, we present a stylized model on context-dependent inequality aversion that accounts for the observed effects.

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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-023.

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Date of creation: 05 Jun 2012
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Handle: RePEc:jrp:jrpwrp:2012-023
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  1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences With Simple Tests," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 817-869, August.
  2. Werner Güth & Kerstin Pull & Manfred Stadler & Agnes Stribeck, 2010. "Equity versus Efficiency? - Evidence from Three-Person Generosity Experiments -," Jena Economic Research Papers 2010-018, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. Simona Cicognani & Aanna D'Ambrosio & Werner Güth & Simone Pfuderer & Matteo Ploner, 2012. "Community Projects: An Experimental Analysis of a Fair Implementation Process," Jena Economic Research Papers 2012-015, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. David K Levine, 1997. "Modeling Altruism and Spitefulness in Experiments," Levine's Working Paper Archive 2047, David K. Levine.
  5. 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.
  6. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  7. Kirchsteiger, Georg, 1994. "The role of envy in ultimatum games," Journal of Economic Behavior & Organization, Elsevier, vol. 25(3), pages 373-389, December.
  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.
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