Effective equity experiences from an ultimatum experiment

Judit Kovacs and Werner Güth ()

Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: Fairness like other social norms is usually stabilized by punishing norm deviations. Reward uncertainty, however, questions whether norm deviations can be detected and thus punished. By investing in information acquisition, a responder in an ultimatum experiment determines endogenously whether unfair offers are detected and sanctionable. In our experiment a proposer and a responder can distribute among themselves 12 black and 12 white chips where the monetary value of a white chip for the proposer can be rather high ('high payoff mode') or low ('low payoff mode'). The responder can buy information about the proposer's reward type, resulting in commonly known monetary rewards. According to our results more than half of the responders did not buy reward information (30 out of 55). Buying reward information on average did not help the responder nor did it improve efficiency. Surprisingly, commonly known reward information resulted in a lower share of efficient offers. A possible explanation is that mistrust distracts attention.

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