Inequality aversion, efficiency, and maximin preferences in simple distribution experiments

Inequality aversion, efficiency, and maximin preferences in simple distribution experiments

01/01/2002 | Engelmann, D., & Strobel, M.
This paper examines the relative importance of inequality aversion, efficiency, and maximin preferences in simple distribution experiments. The authors compare the performance of two fairness theories: Bolton and Ockenfels' (ERC) "Theory of Equity, Reciprocity, and Competition" and Fehr and Schmidt's (F&S) "Theory of Fairness, Competition, and Cooperation." They find that while F&S performs better in direct comparisons, this is largely due to its alignment with maximin preferences. More importantly, the influence of both efficiency and maximin preferences is stronger than that of inequality aversion. The study uses a variety of experimental treatments, including taxation games, envy games, and rich and poor games, to test these theories. The results suggest that efficiency concerns and maximin preferences are crucial in explaining subjects' choices, while inequality aversion does not significantly add to the explanation. The paper also discusses the implications of these findings for the interpretation of other economic experiments and the potential role of other motives such as altruism and competitiveness.This paper examines the relative importance of inequality aversion, efficiency, and maximin preferences in simple distribution experiments. The authors compare the performance of two fairness theories: Bolton and Ockenfels' (ERC) "Theory of Equity, Reciprocity, and Competition" and Fehr and Schmidt's (F&S) "Theory of Fairness, Competition, and Cooperation." They find that while F&S performs better in direct comparisons, this is largely due to its alignment with maximin preferences. More importantly, the influence of both efficiency and maximin preferences is stronger than that of inequality aversion. The study uses a variety of experimental treatments, including taxation games, envy games, and rich and poor games, to test these theories. The results suggest that efficiency concerns and maximin preferences are crucial in explaining subjects' choices, while inequality aversion does not significantly add to the explanation. The paper also discusses the implications of these findings for the interpretation of other economic experiments and the potential role of other motives such as altruism and competitiveness.
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