Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments

Abstract

We present simple one-shot distribution experiments comparing the relative importance of efficiency, maximin preferences and inequality aversion, as well as the relative performance of the fairness theories by Bolton and Ockenfels (2000) and Fehr and Schmidt (1999). While the Fehr and Schmidt model performs better in a direct comparison, this appears to be due to being in line with maximin preferences. More importantly, we find that the influence of both efficiency and maximin preferences is stronger than that of inequality aversion. We discuss potential implications our results might have for the interpretation of other experiments.

Are Cooperators Efficiency- or Fair-Minded? Evidence from a Public Goods Experiment

“…This is in line with the findings of, e.g., Güth et al (2003), Okada and Riedl (2005), and Staffiero (2006). Yet, it stands against the results of Kritikos and Bolle (2001), Andreoni and Miller (2002), Charness and Rabin (2002), and Engelmann and Strobel (2004), who, however, look at the issue in allocation games where increasing the others' payoff does not always necessarily require to put oneself at a relative disadvantage.…”

“…A handful of experimental studies investigate whether people act on efficiency motives. Some (such as Kritikos and Bolle, 2001;Andreoni and Miller, 2002;Charness and Rabin, 2002;Engelmann and Strobel, 2004) find that a substantial proportion of individuals in dictator-like games prefer efficiency over equality in payoffs. 2 Others suggest that efficiency becomes a much less important motive when it requires high monetary sacrifice (Güth et al, 2003;Okada and Riedl, 2005).…”

Distributing Indivisible Goods Fairly: Evidence from a Questionnaire Study

“…The interest in this question has been further sparked by the extensive experimental literature in economics demonstrating that individual behavior is not only guided by the pursuit of material self-interest, but to a significant extent also by fairness considerations (see, among many others, Fehr and Schmidt 1999, Bolton and Ockenfels 2000, Charness and Rabin 2002, Camerer 2003, and Engelmann and Strobel 2004. But what do people consider to be fair?…”

Tacit Coordination in Games with Third-Party Externalities

“…Under these assumptions, decision makers will ignore the consequences their actions have on non-decision makers when facing coordination problems; a fact which may explain why researchers have so far focused exclusively on the decision makers'private incentives overlooking the potential role of third-party externalities. However, by now there is considerable evidence from bargaining and social-dilemma experiments challenging the parsimony of these assumptions, suggesting that at least some individuals are not entirely sel…sh but have social preferences, i.e., their utility does not depend only on their material payo¤, but also on that of other decision makers (e.g., Andreoni et al 2003;Engelmann and Strobel, 2004;Fisman et al, 2007) and, sometimes, on that of third parties (e.g., Ellman and Pezanis-Christou, 2010; McDonald et al, 2013).…”

“…This de…nition of e¢ ciency may seem odd to some when the game does not allow for monetary transfers across players. Nevertheless, many experimental subjects appear to care for the sum of group earnings (e.g., Engelmann and Strobel, 2004). …”