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Us and Them: Distributional Preferences in Small and Large Groups

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  • Schumacher, Heiner
  • Kesternich, Iris
  • Kosfeld, Michael
  • Winter, Joachim

Abstract

We analyze distributional preferences in games in which a decider chooses the provision of a good that benefits a receiver and creates costs for a group of payers. The average decider takes into account the welfare of all parties and has concerns for efficiency. However, she attaches similar weights to small and large groups so that she neglects large provision costs that are dispersed among many payers. This holds regardless of whether the decider benefits from the provision or not. A CES utility function which rationalizes average behavior implies altruism in bilateral situations and welfare-damaging actions when costs are dispersed.

Suggested Citation

  • Schumacher, Heiner & Kesternich, Iris & Kosfeld, Michael & Winter, Joachim, 2014. "Us and Them: Distributional Preferences in Small and Large Groups," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 453, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:453
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    1. Kesternich, Iris & Schumacher, Heiner & Winter, Joachim, 2015. "Professional norms and physician behavior: Homo oeconomicus or homo hippocraticus?," Journal of Public Economics, Elsevier, vol. 131(C), pages 1-11.
    2. Lohse, Johannes, 2015. "Cooperation at a discount - Will I give away your money?," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113151, Verein für Socialpolitik / German Economic Association.
    3. Dominik J. Wettstein & Stefan Boes, 2020. "The impact of reimbursement negotiations on cost and availability of new pharmaceuticals: evidence from an online experiment," Health Economics Review, Springer, vol. 10(1), pages 1-15, December.
    4. Nelson, Katherine M. & Schlüter, Achim & Vance, Colin, 2017. "Distributional preferences and donation behavior among marine resource users in Wakatobi, Indonesia," Ruhr Economic Papers 690, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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    More about this item

    Keywords

    Social Preferences; Distribution Games; Concentrated Benefits and Dispersed Costs;
    All these keywords.

    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
    • H00 - Public Economics - - General - - - General

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