IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/24475.html
   My bibliography  Save this paper

Just luck: an experimental study of risk taking and fairness

Author

Listed:
  • Cappelen, Alexander W
  • Konow, James
  • Sorensen, Erik O
  • Tungodden, Bertil

Abstract

Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risk-taking, specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes. We find that, even though many participants focus exclusively on ex ante opportunities, most favor some redistribution ex post. Many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. These findings apply to both stakeholders and impartial spectators.

Suggested Citation

  • Cappelen, Alexander W & Konow, James & Sorensen, Erik O & Tungodden, Bertil, 2010. "Just luck: an experimental study of risk taking and fairness," MPRA Paper 24475, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24475
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/24475/1/MPRA_paper_24475.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Cappelen, Alexander W. & Tungodden, Bertil, 2006. "A Liberal Egalitarian Paradox," Economics and Philosophy, Cambridge University Press, vol. 22(3), pages 393-408, November.
    2. Todd L. Cherry & Peter Frykblom & Jason F. Shogren, 2002. "Hardnose the Dictator," American Economic Review, American Economic Association, vol. 92(4), pages 1218-1221, September.
    3. Marc Fleurbaey, 2010. "Assessing Risky Social Situations," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 649-680, August.
    4. 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.
    5. Shogren, Jason F., 1992. "An experiment on Coasian bargaining over ex ante lotteries and ex post rewards," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 153-169, January.
    6. 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.
    7. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
    8. Brice Magdalou & Dimitri Dubois & Phu Nguyen-Van, 2009. "Risk and Inequality Aversion in Social Dilemmas," Working Papers 09, Development and Policies Research Center (DEPOCEN), Vietnam, revised Feb 2009.
    9. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
    10. James Konow, 2009. "Is fairness in the eye of the beholder? An impartial spectator analysis of justice," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 33(1), pages 101-127, June.
    11. Brennan, Geoffrey & González, Luis G. & Güth, Werner & Levati, M. Vittoria, 2008. "Attitudes toward private and collective risk in individual and strategic choice situations," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 253-262, July.
    12. Alon Harel, 2005. "Ex-Post Egalitarianism and Legal Justice," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(1), pages 57-75, April.
    13. Andrews, Donald W K, 2001. "Testing When a Parameter Is on the Boundary of the Maintained Hypothesis," Econometrica, Econometric Society, vol. 69(3), pages 683-734, May.
    14. Alexander Cappelen & Astri Hole & Erik Sørensen & Bertil Tungodden, 2011. "The importance of moral reflection and self-reported data in a dictator game with production," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 36(1), pages 105-120, January.
    15. Daniel J. Zizzo & Andrew J. Oswald, 2001. "Are People Willing to Pay to Reduce Others'Incomes?," Annals of Economics and Statistics, GENES, issue 63-64, pages 39-65.
    16. Silvester Van Koten & Andreas Ortmann & Vitezslav Babicky, 2013. "Fairness in Risky Environments: Theory and Evidence," Games, MDPI, vol. 4(2), pages 1-35, May.
    17. Peter A. Diamond, 1967. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparison of Utility: Comment," Journal of Political Economy, University of Chicago Press, vol. 75, pages 765-765.
    18. Alexander W. Cappelen & Astri Drange Hole & Erik Ø Sørensen & Bertil Tungodden, 2007. "The Pluralism of Fairness Ideals: An Experimental Approach," American Economic Review, American Economic Association, vol. 97(3), pages 818-827, June.
    19. Krawczyk, Michal, 2010. "A glimpse through the veil of ignorance: Equality of opportunity and support for redistribution," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 131-141, February.
    20. Vitezslav Babicky, 2003. "Fairness Under Risk: Insights from Dictator Games," CERGE-EI Working Papers wp217, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    21. Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665, National Bureau of Economic Research, Inc.
    22. repec:adr:anecst:y:2001:i:63-64:p:03 is not listed on IDEAS
    23. James Konow, 2000. "Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions," American Economic Review, American Economic Association, vol. 90(4), pages 1072-1091, September.
    24. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309-309.
    25. Alon Harel & Zvi Safra & Uzi Segal, 2003. "Ex-Post Egalitarianism," Boston College Working Papers in Economics 563, Boston College Department of Economics.
    26. Norman Frohlich & Joe Oppenheimer & Anja Kurki, 2004. "Modeling Other-Regarding Preferences and an Experimental Test," Public Choice, Springer, vol. 119(1_2), pages 91-117, April.
    27. repec:adr:anecst:y:2001:i:63-64:p:04 is not listed on IDEAS
    28. James Konow & Tatsuyoshi Saijo & Kenju Akai, 2008. "Morals and Mores? Experimental Evidence on Equity and Equality from the US and Japan," Levine's Working Paper Archive 122247000000002055, David K. Levine.
    29. Daniel John Zizzo, 2003. "Inequality and Procedural Fairness in a Money Burning and Stealing Experiment," Economics Series Working Papers 155, University of Oxford, Department of Economics.
    30. Hammond, Peter J, 1981. "Ex-ante and Ex-post Welfare Optimality under Uncertainty," Economica, London School of Economics and Political Science, vol. 48(191), pages 235-250, August.
    31. Christopher Ferrall, 2005. "Solving Finite Mixture Models: Efficient Computation in Economics Under Serial and Parallel Execution," Computational Economics, Springer;Society for Computational Economics, vol. 25(4), pages 343-379, June.
    32. Zizzo, Daniel John, 2003. "Money burning and rank egalitarianism with random dictators," Economics Letters, Elsevier, vol. 81(2), pages 263-266, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rustichini, Aldo & Villeval, Marie Claire, 2014. "Moral hypocrisy, power and social preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 10-24.
    2. Alexia Gaudeul, 2013. "Social preferences under uncertainty," Jena Economic Research Papers 2013-024, Friedrich-Schiller-University Jena.
    3. Mollerstrom, Johanna & Reme, Bjørn-Atle & Sørensen, Erik Ø., 2015. "Luck, choice and responsibility — An experimental study of fairness views," Journal of Public Economics, Elsevier, vol. 131(C), pages 33-40.
    4. Elena Cettolin & Arno Riedl, 2017. "Justice Under Uncertainty," Management Science, INFORMS, vol. 63(11), pages 3739-3759, November.
    5. Tigran Melkonyan & Zvi Safra & Sinong Ma, 2021. "Justice in an uncertain world: Evidence on donations to cancer research," Journal of Risk and Uncertainty, Springer, vol. 62(3), pages 281-311, June.
    6. Grimalda, Gianluca & Kar, Anirban & Proto, Eugenio, 2012. "Everyone Wants a Chance : Initial Positions and Fairness in Ultimatum Games," The Warwick Economics Research Paper Series (TWERPS) 989, University of Warwick, Department of Economics.
    7. Daniel Müller & Sander Renes, 2021. "Fairness views and political preferences: evidence from a large and heterogeneous sample," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 56(4), pages 679-711, May.
    8. Grimalday, Gianluca & Karz, Anirban & Proto, Eugenio, 2012. "Everyone Wants a Chance: Initial Positions and Fairness in Ultimatum Games," CAGE Online Working Paper Series 93, Competitive Advantage in the Global Economy (CAGE).
    9. Alexander Cappelen & Astri Hole & Erik Sørensen & Bertil Tungodden, 2011. "The importance of moral reflection and self-reported data in a dictator game with production," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 36(1), pages 105-120, January.
    10. Ubeda, Paloma, 2014. "The consistency of fairness rules: An experimental study," Journal of Economic Psychology, Elsevier, vol. 41(C), pages 88-100.
    11. Ingvild Almås & Alexander W Cappelen & Kjell G Salvanes & Erik Ø Sørensen & Bertil Tungodden, 2017. "Fairness and family background," Politics, Philosophy & Economics, , vol. 16(2), pages 117-131, May.
    12. Silvester Van Koten & Andreas Ortmann & Vitezslav Babicky, 2013. "Fairness in Risky Environments: Theory and Evidence," Games, MDPI, vol. 4(2), pages 1-35, May.
    13. Dengler-Roscher, Kathrin & Montinari, Natalia & Panganiban, Marian & Ploner, Matteo & Werner, Benedikt, 2018. "On the malleability of fairness ideals: Spillover effects in partial and impartial allocation tasks," Journal of Economic Psychology, Elsevier, vol. 65(C), pages 60-74.
    14. Cetre, Sophie & Lobeck, Max & Senik, Claudia & Verdier, Thierry, 2019. "Preferences over income distribution: Evidence from a choice experiment," Journal of Economic Psychology, Elsevier, vol. 74(C).
    15. 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.
    16. Daniel Müller & Sander Renes, 2017. "Fairness views and political preferences - Evidence from a large online experiment," Working Papers 2017-10, Faculty of Economics and Statistics, University of Innsbruck.
    17. Cappelen, Alexander W. & Luttens, Roland I. & Sørensen, Erik Ø. & Tungodden, Bertil, 2015. "Fairness in bankruptcy situations: an experimental study," Discussion Paper Series in Economics 17/2015, Norwegian School of Economics, Department of Economics.
    18. Fehr, Dietmar, 2018. "Is increasing inequality harmful? Experimental evidence," Games and Economic Behavior, Elsevier, vol. 107(C), pages 123-134.
    19. Ismael Rodriguez-Lara & Luis Moreno-Garrido, 2012. "Self-interest and fairness: self-serving choices of justice principles," Experimental Economics, Springer;Economic Science Association, vol. 15(1), pages 158-175, March.
    20. Ismael Rodriguez-Lara & Luis Moreno-Garrido, 2012. "Modeling Inequity Aversion in a Dictator Game with Production," Games, MDPI, vol. 3(4), pages 1-12, October.

    More about this item

    Keywords

    fairness; justice; risk;
    All these keywords.

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:24475. 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: . General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.