Equality, Equity and Incentives: An Experiment

61 Pages Posted: 4 Oct 2010

See all articles by Loukas Balafoutas

Loukas Balafoutas

University of Innsbruck

Martin G. Kocher

Ludwig Maximilian University of Munich - Faculty of Economics; Institute for Advanced Studies (IHS) - Department of Economics & Finance; Göteborg University - School of Business, Economics and Law; Queensland University of Technology - School of Economics and Finance

Louis Putterman

Brown University - Department of Economics

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

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Abstract

We devise a new experimental game by nesting a voluntary contributions mechanism in a broader spectrum of incentive schemes. With it, we study tensions between egalitarianism, equity concerns, self-interest, and the need for incentives. In a 2x2 design, subjects either vote on or exogenously encounter incentive settings while assigned unequal incomes that are either task-determined or random. We find subjectsメ voting to be mainly self-interested but also influenced by egalitarian and equity concerns, which sometimes cut in opposite directions. Contributions, which seem mainly determined by boundedly rational responses to incentives, are influenced by egalitarian, equity and strategic considerations.

Keywords: equality, efficiency, voluntary contribution mechanism, incentives, experiment

JEL Classification: C91, C92, D31, D63, H41

Suggested Citation

Balafoutas, Loukas and Kocher, Martin G. and Putterman, Louis G. and Sutter, Matthias, Equality, Equity and Incentives: An Experiment. IZA Discussion Paper No. 5204. Available at SSRN: https://ssrn.com/abstract=1686495

Loukas Balafoutas (Contact Author)

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Martin G. Kocher

Ludwig Maximilian University of Munich - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

Institute for Advanced Studies (IHS) - Department of Economics & Finance ( email )

Stumpergasse 56
A-1060 Vienna, A-1060
Austria

Göteborg University - School of Business, Economics and Law ( email )

Vasagatan 1
Goteborg, 40530
Sweden

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Louis G. Putterman

Brown University - Department of Economics ( email )

Box B
Providence, RI 02912
United States
401-863-3837 (Phone)
401-863-1970 (Fax)

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics

Cologne, 50923
Germany

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