Peer-Induced Fairness in Games
- (pp. 2022-49)
Abstract
People exhibit peer-induced fairness concerns when they look to their peers as a reference to evaluate their endowments. We analyze two independent ultimatum games played sequentially by a leader and two followers. With peer-induced fairness, the second follower is averse to receiving less than the first follower. Using laboratory experimental data, we estimate that peer-induced fairness between followers is two times stronger than distributional fairness between leader and follower. Allowing for heterogeneity, we find that 50 percent of subjects are fairness-minded. We discuss how peer-induced fairness might limit price discrimination, account for low variability in CEO compensation, and explain pattern bargaining. (JEL C72, D63 )Citation
Ho, Teck-Hua, and Xuanming Su. 2009. "Peer-Induced Fairness in Games." American Economic Review, 99 (5): 2022-49. DOI: 10.1257/aer.99.5.2022Additional Materials
JEL Classification
- C72 Noncooperative Games
- D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement