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Market experience is a reference point in judgments of fairness


  • Holger Herz
  • Dmitry Taubinsky


People's desire for fair transactions can play an important role in negotiations, organizations, and markets. In this paper, we show that markets can also shape what people consider to be a fair transaction. We propose a simple and generally-applicable model of path-dependent fairness preferences, in which past experiences shape preferences, and we experimentally test the model's predictions. We find that previous exposure to competitive pressure substantially and persistently reduces subjects' fairness concerns, making them more likely to accept low offers. Consistent with our theory, we also find that past experience has little effect on subjects' inclinations to treat others unfairly.

Suggested Citation

  • Holger Herz & Dmitry Taubinsky, 2013. "Market experience is a reference point in judgments of fairness," ECON - Working Papers 128, Department of Economics - University of Zurich.
  • Handle: RePEc:zur:econwp:128

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    Cited by:

    1. Herz, Holger & Taubinsky, Dmitry, 2016. "What makes a price fair ? An experimental study of transaction experience and endogenous fairness views," FSES Working Papers 477, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    2. Jordi Brandts & Arno Riedl, 2015. "Market Interaction and Efficient Cooperation," Working Papers 868, Barcelona Graduate School of Economics.
    3. Thomas Buser & Anna Dreber, 2016. "The Flipside of Comparative Payment Schemes," Management Science, INFORMS, vol. 62(9), pages 2626-2638, September.
    4. Brandts J. & Riedl A.M., 2016. "Market competition and efficient cooperation," Research Memorandum 006, Maastricht University, Graduate School of Business and Economics (GSBE).
    5. Holger Herz & Dmitry Taubinsky, 2016. "What Makes a Price Fair? An Experimental Analysis of Transaction Experience and Endogenous Fairness Views," NBER Working Papers 22728, National Bureau of Economic Research, Inc.

    More about this item


    Social preferences; reference points; fairness; bargaining;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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