Second-Best Fairness Under Limited Information: The Trade-Off between False Positives and False Negatives

38 Pages Posted: 12 Sep 2018

See all articles by Alexander W. Cappelen

Alexander W. Cappelen

Norwegian School of Economics (NHH) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Cornelius Cappelen

University of Bergen

Bertil Tungodden

Norwegian School of Economics (NHH) - Department of Economics

Date Written: August 28, 2018

Abstract

In many important economic settings, limited information makes it impossible for decision makers to ensure that each individual gets what he or she deserves. Decision makers are then faced with the trade-off between giving some individuals more than they deserve, false positives, and giving some individuals less than they deserve, false negatives. We present the results from a large-scale experimental study of how people trade off these two mistakes in distributive choices. We find that a majority are more concerned with avoiding false negatives than with avoiding false positives, but we also document heterogeneity With respect to how people make this trade-off. The findings shed important light on people’s attitudes to a wide range of policies by providing novel evidence on an important dimension of people’s social preference.

JEL Classification: D63

Suggested Citation

Cappelen, Alexander W. and Cappelen, Cornelius and Tungodden, Bertil, Second-Best Fairness Under Limited Information: The Trade-Off between False Positives and False Negatives (August 28, 2018). NHH Dept. of Economics Discussion Paper No. 18/2018. Available at SSRN: https://ssrn.com/abstract=3243332 or http://dx.doi.org/10.2139/ssrn.3243332

Alexander W. Cappelen (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Cornelius Cappelen

University of Bergen ( email )

Muséplassen 1
N-5008 Bergen, +47 55 58
Norway

Bertil Tungodden

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

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