Equity Concerns are Narrowly Framed

Christine L. Exley and Judd B. Kessler

No 25326, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Distributional decisions regularly involve multiple payoff components. In a series of experiments involving over 3,300 subjects and 81,000 decisions, we find that—even when payoff components can be easily aggregated—many subjects exhibit narrow equity concerns, applying fairness preferences to a single component of payoffs. This behavior leads to preference reversals; subjects make different choices depending on which payoff component is used to denominate their decision. In our simplest setting, in which the two payoff components are small and large tokens, displaying narrow equity concerns is 63%–83% as prevalent as achieving equity in total payoffs and just as prevalent as applying the well-documented norm of a 50/50-split. Subjects also exhibit narrowly equity concerns over payoffs of time and money.

JEL-codes: C91 D63 H2 (search for similar items in EconPapers)
Date: 2018-12
New Economics Papers: this item is included in nep-exp and nep-upt
Note: PE
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Citations: View citations in EconPapers (10)

Published as Christine L. Exley & Judd B. Kessler, 2024. "Equity Concerns Are Narrowly Framed," American Economic Journal: Microeconomics, vol 16(2), pages 147-179.

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