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Fairness Versus Efficiency: How Procedural Fairness Concerns Affect Coordination

Verena Kurz, Andreas Orland () and Kinga Posadzy ()
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Verena Kurz: University of Gothenburg, Department of Economics, Sweden
Kinga Posadzy: Division of Economics, Department of Management and Engineering, Linköping University, Postal: Linköping University, SE-581 83 Linköping, Sweden

No 3, LiU Working Papers in Economics from Linköping University, Division of Economics, Department of Management and Engineering

Abstract: What happens if a mechanism that aims at improving coordination treats some individuals unfairly? We investigate in a laboratory experiment whether procedural fairness concerns affect how well individuals are able to solve a coordination problem in a two-player Volunteer’s Dilemma. Subjects receive external action recommendations that can help them avoid miscoordination if followed by both players. One of the players receives a disadvantageous recommendation to volunteer while the other player receives a recommendation not to volunteer that gives her a payoff advantage if both players follow the recommendations they have received. We manipulate the fairness of the recommendation procedure by varying the probabilities of receiving a disadvantageous recommendation between players. We find that the recommendations improve overall efficiency regardless of their consequences for payoff division. However, there are behavioral asymmetries depending on the recommendation received by a player: advantageous recommendations are followed less frequently than disadvantageous recommendations in case of actions that guarantee a low payoff. While there is no difference in acceptance of different recommendation procedures, beliefs about others’ actions are more pessimistic in the treatment with a procedure inducing unequal expected payoffs. Our data shows that beliefs about others’ behavior are correlated with one’s own behavior, however this is the case only when following recommendations is a strategy that involves payoff-uncertainty.

Keywords: Coordination; Correlated equilibrium; Recommendations; Procedural fairness; Volunteer’s Dilemma; Experiment (search for similar items in EconPapers)
JEL-codes: C72 C91 D63 D83 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2016-03-01
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-hpe
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Journal Article: Fairness versus efficiency: how procedural fairness concerns affect coordination (2018) Downloads
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