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Information Asymmetry and Beliefs Reveal Self Interest Not Fairness

Andrea Guido, Alejandro Martinez-Marquina and Ryan Rholes
Additional contact information
Alejandro Martinez-Marquina: Stanford University
Ryan Rholes: Texas A&M University

No 2020-53, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: Decades of research suggests that other-regarding preferences explain deviations from the self-interested behavior predicted by standard theory. However, the vast majority of this evidence considers strategic interactions when agents are fully informed and economic conditions are stable. We relax both of these conditions by expanding the widely used gift-exchange game to include permanent endowment shocks and information frictions. Varying information conditions reveals that a large fraction of the behavior previously attributed to fairness and reciprocity is actually driven by self-interest motives and intentions-based concerns. Counter-intuitively, we find that information frictions do not always benefit the more informed party.

Keywords: fairness; expectations; beliefs; information; wage rigidity; labor market; business cycle; wages (search for similar items in EconPapers)
JEL-codes: E32 J2 J3 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2020-12
New Economics Papers: this item is included in nep-mac
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