Equality, Equity and Incentives: An Experiment

By Loukas Balafoutas, Martin G. Kocher, Louis Putterman, Matthias Sutter. Social Science Research Network, 2013

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We study a fundamental conflict in economic decision-making, the trade-off between equality, equity and incentives, in a new experimental game that nests a voluntary contributions mechanism in a broader spectrum of incentive schemes. In a 2×2 design, we let subjects either vote on or exogenously encounter incentive settings while assigned unequal endowments are either task-determined or random. We find that earned endowments lead to less support for redistribution and less cooperation. Subjects' voting is influenced by egalitarian and equity concerns, in addition to self-interest. Cooperation rates respond rather continuously to incentives.

Subfields: Demography, Management Science and Operations Research, Safety Research

View Paper: https://www.semanticscholar.org/paper/142a4e84a28d6e3a1cf9ac87a74c419db8929892