Understanding Social Preferences with Simple Tests

Abstract

Departures from self-interest in economic experiments have recently inspired models of "social preferences". We design a range of simple experimental games that test these theories more directly than existing experiments. Our experiments show that subjects are more concerned with increasing social welfare-sacrificing to increase the payoffs for all recipients, especially low-payoff recipients-than with reducing differences in payoffs (as supposed in recent models). Subjects are also motivated by reciprocity: They withdraw willingness to sacrifice to achieve a fair outcome when others are themselves unwilling to sacrifice, and sometimes punish unfair behavior.

Perceptions of unfairness in allocations between multiple recipients

“…In an empirical test of Rawls's theory, Frohlich and Oppenheimer (1992) found that most participants preferred income distributions with the highest total payoff given a floor constraint; that is, a key consideration was to minimize the distance between the loser and others. Similarly, the size of the loser's share is a key component of Charness and Rabin's (2002) social welfare function. For ease of comparison, we can express their model in terms of differences between shares instead of absolute share sizes.…”

“…To summarize, the model we propose takes into account both the general envy-based sense of unfairness of Varian (197699) and the loser-based sense of unfairness of Rawls (1999) and Charness and Rabin (2002).…”

“…We address situations in which (1) the size of the resource to be allocated is fixed and (2) the recipients are indistinguishable in terms of merit. The first of these assumptions is somewhat unusual in the fairness literature where the focus in both political philosophy (Rawls 1999;Binmore 2005) and key empirical work (Frohlich, Oppenheimer and Eavey 1987;Bazerman, Blount White and Loewenstein 1995;Hsee, Loewenstein, Blount, Bazerman 1999;Charness and Rabin 2002) has been how people strike a balance between equality and efficiency. Thus, rather than the amount of available resources being fixed, existing research typically assumes it depends on the system that determines the allocation.…”

“…Interestingly, although several existing models make implicit assumptions about what kinds of differences are more important in perceptions of unfairness (Varian 1976;Fehr and Schmidt 1999;Charness and Rabin 2002), no prior work has explicitly examined this very basic question. With previous models as a starting point, we will address which differences in rewards are most important for perceived unfairness.…”

Modeling Social Preferences: A Generalized Model of Inequity Aversion

“…Literature in this area is expanding rapidly and so is variety of the proposed models. These models include both linear (such as Fehr and Schmidt 1999; Charness and Rabin 2002;Levine 1998;Rotemberg 2004;and Erlei 2004), and nonlinear models (such as Bolton and Ockenfels 2000;Cox et al 2004;Ottone and Ponzano 2005;and Cox et al 2007).…”