This paper presents findings from a series of experiments testing theories of social preferences. Gary Charness and Matthew Rabin examine how individuals make decisions in economic games, focusing on social welfare, fairness, and reciprocity. They find that participants are more concerned with increasing social welfare—sacrificing to increase payoffs for all recipients, especially low-payoff recipients—than with reducing differences in payoffs. Subjects are also motivated by reciprocity: they are less willing to sacrifice to achieve a fair outcome when others are unwilling to sacrifice, and sometimes punish unfair behavior. The authors test various models of social preferences, including difference aversion, social-welfare models, and reciprocity models. They find that social-welfare preferences better explain the data than difference aversion models. They also find that reciprocity plays a significant role in participants' behavior, with subjects exhibiting concern withdrawal: they are less willing to sacrifice to achieve fairness when others are unwilling to sacrifice. The authors also find that subjects are more likely to punish unfair behavior when it is costly for the punisher. The experiments include 29 different games with 467 participants making 1697 decisions. The authors analyze the data using a simple linear model of preferences that allows for the estimation of parameters related to social preferences. They find that social-welfare preferences explain the data better than difference aversion models, and that subjects clearly behave reciprocally. The authors also find that social-welfare preferences can explain the finding that about half of subjects make inequality-increasing sacrifices when these sacrifices are efficient and inexpensive. The authors conclude that the role of inequality-reduction in motivating subjects has been exaggerated. They find that few subjects sacrifice money to reduce inequality by lowering another subject's payoff, and only a minority do so even when this is free. They also find that Pareto-damaging behavior is more common when it increases inequality than when it decreases inequality. The authors suggest that social-welfare preferences provide a better theory of helpful sacrifice than difference-aversion models. They also find that reciprocity plays a significant role in participants' behavior, with subjects exhibiting concern withdrawal and increased Pareto-damaging behavior following selfish actions by others. The authors conclude that social-welfare preferences and reciprocity are important in explaining participants' behavior in economic games.This paper presents findings from a series of experiments testing theories of social preferences. Gary Charness and Matthew Rabin examine how individuals make decisions in economic games, focusing on social welfare, fairness, and reciprocity. They find that participants are more concerned with increasing social welfare—sacrificing to increase payoffs for all recipients, especially low-payoff recipients—than with reducing differences in payoffs. Subjects are also motivated by reciprocity: they are less willing to sacrifice to achieve a fair outcome when others are unwilling to sacrifice, and sometimes punish unfair behavior. The authors test various models of social preferences, including difference aversion, social-welfare models, and reciprocity models. They find that social-welfare preferences better explain the data than difference aversion models. They also find that reciprocity plays a significant role in participants' behavior, with subjects exhibiting concern withdrawal: they are less willing to sacrifice to achieve fairness when others are unwilling to sacrifice. The authors also find that subjects are more likely to punish unfair behavior when it is costly for the punisher. The experiments include 29 different games with 467 participants making 1697 decisions. The authors analyze the data using a simple linear model of preferences that allows for the estimation of parameters related to social preferences. They find that social-welfare preferences explain the data better than difference aversion models, and that subjects clearly behave reciprocally. The authors also find that social-welfare preferences can explain the finding that about half of subjects make inequality-increasing sacrifices when these sacrifices are efficient and inexpensive. The authors conclude that the role of inequality-reduction in motivating subjects has been exaggerated. They find that few subjects sacrifice money to reduce inequality by lowering another subject's payoff, and only a minority do so even when this is free. They also find that Pareto-damaging behavior is more common when it increases inequality than when it decreases inequality. The authors suggest that social-welfare preferences provide a better theory of helpful sacrifice than difference-aversion models. They also find that reciprocity plays a significant role in participants' behavior, with subjects exhibiting concern withdrawal and increased Pareto-damaging behavior following selfish actions by others. The authors conclude that social-welfare preferences and reciprocity are important in explaining participants' behavior in economic games.