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Stability and explanatory power of inequality aversion: an investigation of the house money effect

  • Dannenberg, Astrid
  • Riechmann, Thomas
  • Sturm, Bodo
  • Vogt, Carsten

In this paper, we analyse if individual inequality aversion measured with simple experimental games depends on whether the monetary endowment in these games is either a windfall gain ("house money") or a reward for a certain effort-related performance. Moreover, we analyse whether the way of preference elicitation affects the explanatory power of inequality aversion in social dilemma situations. Our results indicate that individual inequality aversion is not generally robust to the way endowments emerge. Furthermore, the use of money earned by real efforts instead of house money does not improve the generally low predictive power of the inequality aversion model. Hypotheses based on the inequality aversion model lose their predictive power when preferences are elicited with earned money.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 10-006.

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Date of creation: 2010
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Handle: RePEc:zbw:zewdip:10006
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  1. Jeremy Clark, 2002. "House Money Effects in Public Good Experiments," Experimental Economics, Springer, vol. 5(3), pages 223-231, December.
  2. Cherry, Todd L. & Kroll, Stephan & Shogren, Jason F., 2005. "The impact of endowment heterogeneity and origin on public good contributions: evidence from the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 357-365, July.
  3. Sturm, Bodo & Riechmann, Thomas & Dannenberg, Astrid & Vogt, Carsten, 2007. "Inequity Aversion and Individual Behavior in Public Good Games: An Experimental Investigation," ZEW Discussion Papers 07-034 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  15. Sabrina Teyssier, 2009. "Inequity and Risk Aversion in Sequential Public Good Games," Post-Print halshs-00422669, HAL.
  16. Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
  17. Ernst Fehr & Simon Gaechter, 1999. "Cooperation and Punishment in Public Goods Experiments," CESifo Working Paper Series 183, CESifo Group Munich.
  18. Cherry, Todd L., 2001. "Mental accounting and other-regarding behavior: Evidence from the lab," Journal of Economic Psychology, Elsevier, vol. 22(5), pages 605-615, October.
  19. Eckel, Catherine C. & Grossman, Philip J., 1996. "Altruism in Anonymous Dictator Games," Games and Economic Behavior, Elsevier, vol. 16(2), pages 181-191, October.
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