We use a lab experiment to test competing models on distributional preferences. The experiment is composed of two parts. The first part is a simple test which facilitates a direct measure of how much an individual cares about inequity and efficiency at the same time. We design the test in a way such that risk aversion does not play a role when subjects make their decisions. Therefore, noises caused by uncertainty-concerning strategies are controlled. The second part, a production game, is used to test the predictive power of different models on distributional preference at the individual level. Two properties make this production game well suit the task: 1. for each party who is playing the game, dominant strategy exists; 2. unique prediction, which is fully determined by individual-specific preference parameters measured in the first part, exists for each candidate model. We find that advantageous inequity aversion and efficiency concern widely exist among subjects. In contrast, we hardly find subjects have positive disadvantageous inequity aversion. Moreover, advantageous inequity aversion has significant predicting power in the production game, while disadvantageous inequity aversion does not.
PhD Lunch Seminars Amsterdam
- Speaker(s)
- Yang Yang (UvA)
- Date
- 2011-05-17
- Location
- Amsterdam