IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Equality, Equity and Incentives: An Experiment

  • Balafoutas, Loukas
  • Kocher, Martin G.
  • Putterman, Louis
  • Sutter, Matthias

We study a fundamental conflict in economic decision-making, the trade-off between equality, equity and incentives, in a new experimental game that nests a voluntary contributions mechanism in a broader spectrum of incentive schemes. In a 2×2 design, we let subjects either vote on or exogenously encounter incentive settings while assigned unequal endowments are either task-determined or random. We find that earned endowments lead to less support for redistribution and less cooperation. Subjects' voting is influenced by egalitarian and equity concerns, in addition to self-interest. Cooperation rates respond rather continuously to incentives.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 18172.

in new window

Date of creation: May 2013
Date of revision:
Publication status: Published in European Economic Review 60(2013-05): pp. 32-51
Handle: RePEc:lmu:muenar:18172
Contact details of provider: Postal:
Ludwigstr. 28, 80539 Munich, Germany

Phone: +49-(0)89-2180-3405
Fax: +49-(0)89-2180-3510
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Jean-Robert Tyran & Rupert Sausgruber, 2002. "A Little Fairness may Induce a Lot of Redistribution in Democracy," University of St. Gallen Department of Economics working paper series 2002 2002-30, Department of Economics, University of St. Gallen.
  2. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
  3. Grossman, Herschel I., 1995. "Robin hood and the redistribution of property income," European Journal of Political Economy, Elsevier, vol. 11(3), pages 399-410, September.
  4. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
  5. Burrows, Paul & Loomes, Graham, 1994. "The Impact of Fairness on Bargaining Behaviour," Empirical Economics, Springer, vol. 19(2), pages 201-21.
  6. Jean-Robert Tyran & Kenju Kamei & Louis Putterman, 2011. "State or Nature? Formal vs. Informal Sanctioning in the Voluntary Provision of Public Goods," Vienna Economics Papers 1104, University of Vienna, Department of Economics.
  7. Ruben Durante & Louis Putterman & Joël van der Weele, 2013. "Preferences for Redistribution and Perception of Fairness: An Experimental Study," Working Papers 2013-7, Brown University, Department of Economics.
  8. Buckley, Edward & Croson, Rachel, 2006. "Income and wealth heterogeneity in the voluntary provision of linear public goods," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 935-955, May.
  9. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
  10. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  11. Frans van Dijk & Joep Sonnemans & Frans van Winden, 2000. "Social Ties in a Public Good Experiment," CESifo Working Paper Series 273, CESifo Group Munich.
  12. Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, vol. 37(3), pages 291-304, December.
  13. Matthias Sutter & Stefan Haigner & Martin Kocher, . "Choosing the carrot or the stick? ? Endogenous institutional choice in social dilemma situations," Working Papers 2008-07, Faculty of Economics and Statistics, University of Innsbruck.
  14. Großer, Jens & Reuben, Ernesto, 2013. "Redistribution and market efficiency: An experimental study," Journal of Public Economics, Elsevier, vol. 101(C), pages 39-52.
  15. Urs Fischbacher & Simon Gaechter, 2009. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Good Experiments," Discussion Papers 2009-04, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  16. Oliver E. Williamson & Michael L. Wachter & Jeffrey E. Harris, 1975. "Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 250-278, Spring.
  17. Palfrey, Thomas R & Prisbrey, Jeffrey E, 1997. "Anomalous Behavior in Public Goods Experiments: How Much and Why?," American Economic Review, American Economic Association, vol. 87(5), pages 829-46, December.
  18. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
  19. Putterman, Louis & Tyran, Jean-Robert & Kamei, Kenju, 2011. "Public goods and voting on formal sanction schemes," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1213-1222, October.
  20. Thomas Markussen & Louis Putterman & Jean-Robert Tyran, 2011. "Self-Organization for Collective Action: An Experimental Study of Voting on Formal, Informal, and No Sanction Regimes," Discussion Papers 11-04, University of Copenhagen. Department of Economics.
  21. Ernesto Reuben & Arno Riedl, 2009. "Enforcement of Contribution Norms in Public Good Games with Heterogeneous Populations," CESifo Working Paper Series 2725, CESifo Group Munich.
  22. Angeletos, George-Marios & Alesina, Alberto, 2005. "Fairness and Redistribution," Scholarly Articles 4553009, Harvard University Department of Economics.
  23. Simon Gächter & Arno Riedl, 2005. "Moral Property Rights in Bargaining with Infeasible Claims," Management Science, INFORMS, vol. 51(2), pages 249-263, February.
  24. Magdalena Margreiter & Matthias Sutter & Dennis Dittrich, 2005. "Individual and Collective Choice and Voting in Common Pool Resource Problem with Heterogeneous Actors," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(2), pages 241-271, October.
  25. Chan, Kenneth S. & Mestelman, Stuart & Muller, R. Andrew, 2008. "Voluntary Provision of Public Goods," Handbook of Experimental Economics Results, Elsevier.
  26. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975, December.
  27. Sadrieh, Abdolkarim & Verbon, Harrie A.A., 2006. "Inequality, cooperation, and growth: An experimental study," European Economic Review, Elsevier, vol. 50(5), pages 1197-1222, July.
  28. Todd L. Cherry & Stephan Kroll & Jason F. Shogren, 2003. "The Impact of Endowment Heterogeneity and Origin on Public Good Contributions: Evidence from the Lab," Working Papers 03-05, Department of Economics, Appalachian State University.
  29. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
  30. Traub, Stefan & Seidl, Christian & Schmidt, Ulrich, 2009. "An experimental study on individual choice, social welfare, and social preferences," European Economic Review, Elsevier, vol. 53(4), pages 385-400, May.
  31. Wolfgang Höchtl & Rupert Sausgruber & Jean-Robert Tyran, 2011. "Inequality Aversion and Voting on Redistribution," Discussion Papers 11-18, University of Copenhagen. Department of Economics.
  32. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  33. Shelly Lundberg & Robert A. Pollak, 1996. "Bargaining and Distribution in Marriage," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 139-158, Fall.
  34. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
  35. Benabou, Roland & Tirole, Jean, 2004. "Belief in a Just World and Redistributive Politics," Papers 08-15-2005a, Princeton University, Research Program in Political Economy.
  36. Pedro Dal Bó & Andrew Foster & Louis Putterman, 2008. "Institutions and Behavior: Experimental Evidence on the Effects of Democracy," NBER Working Papers 13999, National Bureau of Economic Research, Inc.
  37. Carlsson, Fredrik & Daruvala, Dinky & Johansson-Stenman, Olof, 2001. "Are People Inequality Averse Or Just Risk Averse?," Working Papers in Economics 43, University of Gothenburg, Department of Economics.
  38. Thomas Piketty, 1994. "Social Mobility and Redistributive Politics," Working papers 94-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  39. Kenneth Chan & Stuart Mestelman & Robert Moir & R. Muller, 1999. "Heterogeneity and the Voluntary Provision of Public Goods," Experimental Economics, Springer;Economic Science Association, vol. 2(1), pages 5-30, August.
  40. Andereoni, J., 1988. "Why Free Ride? Strategies And Learning In Public Goods Experiments," Working papers 375, Wisconsin Madison - Social Systems.
  41. Offerman, Theo & Sonnemans, Joep & Schram, Arthur, 1996. "Value Orientations, Expectations and Voluntary Contributions in Public Goods," Economic Journal, Royal Economic Society, vol. 106(437), pages 817-45, July.
  42. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  43. Stefan Grosse & Louis Putterman & Bettina Rockenbach, 2011. "Monitoring In Teams: Using Laboratory Experiments To Study A Theory Of The Firm," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 785-816, 08.
  44. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November.
  45. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
  46. Che,Y.K. & Yoo,S.W., 1998. "Optimal incentives for teams," Working papers 8, Wisconsin Madison - Social Systems.
  47. Itoh, Hideshi, 1992. "Cooperation in Hierarchical Organizations: An Incentive Perspective," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(2), pages 321-45, April.
  48. Cappelen, Alexander W. & Sørensen, Erik Ø. & Tungodden, Bertil, 2010. "Responsibility for what? Fairness and individual responsibility," European Economic Review, Elsevier, vol. 54(3), pages 429-441, April.
  49. John M. Abowd & Michael Bognanno, 1995. "International Differences in Executive and Managerial Compensation," NBER Chapters, in: Differences and Changes in Wage Structures, pages 67-104 National Bureau of Economic Research, Inc.
  50. Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
  51. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
  52. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  53. Amiel, Yoram & Creedy, John & Hurn, Stan, 1999. " Measuring Attitudes towards Inequality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 83-96, March.
  54. Antonio Cabrales & Rosemarie Nagel & José Rodríguez Mora, 2012. "It is Hobbes, not Rousseau: an experiment on voting and redistribution," Experimental Economics, Springer;Economic Science Association, vol. 15(2), pages 278-308, June.
  55. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  56. Urs Fischbacher & Simon Gaechter & Ernst Fehr, . "Are People Conditionally Cooperative? Evidence from a Public Goods Experiment," IEW - Working Papers 016, Institute for Empirical Research in Economics - University of Zurich.
  57. R. M. Isaac & J. M. Walker, 2010. "Group size effects in public goods provision: The voluntary contribution mechanism," Levine's Working Paper Archive 310, David K. Levine.
  58. Tatsuyoshi, S. & Nakamura, H., 1995. "The 'Spite' Dilema in Voluntary Contribution Mechanism Experiments," ISER Discussion Paper 0370, Institute of Social and Economic Research, Osaka University.
  59. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
  60. David Reinstein & Gerhard Riener, 2012. "Decomposing desert and tangibility effects in a charitable giving experiment," Experimental Economics, Springer;Economic Science Association, vol. 15(1), pages 229-240, March.
  61. Bhargava, Sandeep, 1994. "Profit-Sharing and the Financial Performance of Companies: Evidence from U.K. Panel Data," Economic Journal, Royal Economic Society, vol. 104(426), pages 1044-56, September.
  62. Rachel T. A. Croson, 2007. "Theories Of Commitment, Altruism And Reciprocity: Evidence From Linear Public Goods Games," Economic Inquiry, Western Economic Association International, vol. 45(2), pages 199-216, 04.
  63. Brandts, Jordi & Schram, Arthur, 2001. "Cooperation and noise in public goods experiments: applying the contribution function approach," Journal of Public Economics, Elsevier, vol. 79(2), pages 399-427, February.
  64. Lucy F. Ackert & Jorge Martinez-Vazquez & Mark Rider, 2007. "Social Preferences And Tax Policy Design: Some Experimental Evidence," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 487-501, 07.
  65. Brosig, Jeannette, 2002. "Identifying cooperative behavior: some experimental results in a prisoner's dilemma game," Journal of Economic Behavior & Organization, Elsevier, vol. 47(3), pages 275-290, March.
  66. Kruse, Douglas L, 1992. "Profit Sharing and Productivity: Microeconomic Evidence from the United States," Economic Journal, Royal Economic Society, vol. 102(410), pages 24-36, January.
  67. Anderson, Simon P. & Goeree, Jacob K. & Holt, Charles A., 1998. "A theoretical analysis of altruism and decision error in public goods games," Journal of Public Economics, Elsevier, vol. 70(2), pages 297-323, November.
  68. Walker, James M, et al, 2000. "Collective Choice in the Commons: Experimental Results on Proposed Allocation Rules and Votes," Economic Journal, Royal Economic Society, vol. 110(460), pages 212-34, January.
  69. Kenneth S. Chan & Stuart Mestelman & Rob Moir & R. Andrew Muller Moir, 1996. "The Voluntary Provision of Public Goods under Varying Income Distributions," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 54-69, February.
  70. Jean-Robert Tyran & Lars P. Feld, 2006. "Achieving Compliance when Legal Sanctions are Non-deterrent," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 135-156, 03.
  71. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
  72. Jennifer Zelmer, 2003. "Linear Public Goods Experiments: A Meta-Analysis," Experimental Economics, Springer;Economic Science Association, vol. 6(3), pages 299-310, November.
  73. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09iatskih21 is not listed on IDEAS
  74. Branko Milanovic, 2003. "The median voter hypothesis, income inequality and income," HEW 0305001, EconWPA.
  75. Olof Johansson-Stenman & Fredrik Carlsson & Dinky Daruvala, 2002. "Measuring Future Grandparents" Preferences for Equality and Relative Standing," Economic Journal, Royal Economic Society, vol. 112(479), pages 362-383, April.
  76. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
  77. Irlenbusch, Bernd & Ruchala, Gabriele K., 2008. "Relative rewards within team-based compensation," Labour Economics, Elsevier, vol. 15(2), pages 141-167, April.
  78. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:lmu:muenar:18172. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tamilla Benkelberg)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.