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When Fair Isn't Fair: Sophisticated Time Inconsistency in Social Preferences

64 Pages Posted: 17 Apr 2016  

James Andreoni

University of California, San Diego (UCSD)

Deniz Aydin

Stanford University - Department of Economics

Blake Barton

Stanford University - Department of Economics

B. Douglas Bernheim

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Jeffrey Naecker

Wesleyan University - Department of Economics

Date Written: March 22, 2016

Abstract

How do people think about fairness in settings with uncertainty? One view holds that fairness requires equality of opportunity; another holds that it requires equality of outcomes. Relative to the resolution of uncertainty, the first view takes an ex ante perspective, while the second takes an ex post perspective. In this paper, we conduct a laboratory experiment designed to determine which perspective people adopt, and under what conditions. We find that most people view fairness from an ex ante perspective when making decisions ex ante, and from an ex post perspective when making decisions ex post. As a result, they exhibit the hallmark of time-inconsistency: after making an initial plan that is fully state-contingent, they revise it upon learning that certain states will not occur. These patterns are robust and persist even when people are aware of their proclivities. Indeed, subjects who switch from ex ante fair to ex post fair choices, and who are aware of this proclivity, generally avoid precommitments and intentionally retain the flexibility to manifest time inconsistency. We argue that these patterns are best explained by a theory of nominal fairness.

Suggested Citation

Andreoni, James and Aydin, Deniz and Barton, Blake and Bernheim, B. Douglas and Naecker, Jeffrey, When Fair Isn't Fair: Sophisticated Time Inconsistency in Social Preferences (March 22, 2016). Available at SSRN: https://ssrn.com/abstract=2763318

James Andreoni

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

HOME PAGE: http://econ.ucsd.edu/~jandreon/

Deniz Aydin

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

Blake Barton

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

B. Douglas Bernheim

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
650-725-8732 (Phone)
650-725-5702 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jeffrey Naecker (Contact Author)

Wesleyan University - Department of Economics ( email )

238 Church Street
Middletown, CT 06459-0007
United States

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