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Equity Concerns are Narrowly Framed

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  • Christine L. Exley
  • Judd B. Kessler

Abstract

Distributional decisions regularly involve multiple payoff components. In a series of experiments involving over 3,300 subjects and 81,000 decisions, we find that—even when payoff components can be easily aggregated—many subjects exhibit narrow equity concerns, applying fairness preferences to a single component of payoffs. This behavior leads to preference reversals; subjects make different choices depending on which payoff component is used to denominate their decision. In our simplest setting, in which the two payoff components are small and large tokens, displaying narrow equity concerns is 63%–83% as prevalent as achieving equity in total payoffs and just as prevalent as applying the well-documented norm of a 50/50-split. Subjects also exhibit narrowly equity concerns over payoffs of time and money.

Suggested Citation

  • Christine L. Exley & Judd B. Kessler, 2018. "Equity Concerns are Narrowly Framed," NBER Working Papers 25326, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25326
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    2. Gary Bolton & Eugen Dimant & Ulrich Schmidt, 2018. "When a Nudge Backfires. Using Observation with Social and Economic Incentives to Promote Pro-Social Behavior," PPE Working Papers 0017, Philosophy, Politics and Economics, University of Pennsylvania.
    3. Kaufmann, Marc & Machado, Joël & Verheyden, Bertrand, 2021. "Why Do Migrants Stay Unexpectedly? Misperceptions and Implications for Integration," IZA Discussion Papers 14155, Institute of Labor Economics (IZA).
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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