Equal distribution or equal payoffs? Reciprocity and inequality aversion in the investment game

Rodriguez-lara, Ismael (2015): Equal distribution or equal payoffs? Reciprocity and inequality aversion in the investment game.

Abstract

We report experimental evidence on second-movers' behavior in the investment game (also known as the trust game) when there exists endowment heterogeneity. Using a within-subject analysis, we investigate whether second-movers have a tendency to be reciprocal (i.e., they return to first movers at least what they have received from them), or exhibit some taste for inequality aversion (i.e., they return a larger (smaller) share of the available funds to first-movers who are initially endowed with a lesser (larger) endowment, respectively). Our results suggest that second-movers' behavior is consistent across distribution of endowments, what indicates that second-movers (on average) do not take into consideration the level of endowments when making their decisions. This finding, in turn, implies that subjects behave according to our definition of reciprocity and that inequality-aversion receives little support from our data.

• Item Type: MPRA Paper
• Language: English
• Keywords: reciprocity, inequality aversion, investment game, trust game, endowment heterogeneity
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; D - Microeconomics > D3 - Distribution; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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