Favorable Interpretations of Ambiguity and Unstable Preferences for Fairness
38 Pages Posted: 22 Jul 2004
Date Written: June 2004
We show that people manipulate their attitudes towards ambiguity when doing so allows them to behave more self-interestedly. In a "dictator" decision subject chose between a "fair" and an "unfair" choice. By choosing the latter, dictators increase their own allocation by decreasing the allocation to the recipient and making the recipient's allocation dependent on a p=0.5 lottery. More unfair allocations were made when the lottery was ambiguous than when it involved simple risk. Overestimation of the expected value of allocations to recipients was higher in ambiguity, indicating that dictators believe the ambiguous lottery to be more attractive. These results are extinguished if dictators are constrained from adopting a favorable attitude towards ambiguity. These findings suggest that the relationship between ambiguity and unfairness results from a self-serving bias involving the adoption of a favorable view of ambiguity, counter to the typical unfavorable view (ambiguity aversion). We also conducted a contextualized dictator game experiment involving hypothetical managerial decisions. In line with the above findings, participants made more unfair decisions when the consequences of their decisions were ambiguous compared to when they involved simple risk, even though they prefer simple risk over ambiguity when there is no conflict between self-interest and social concerns.
Keywords: Social preference,fairness, ambiguity,ambiguity aversion, managerial decision-making
JEL Classification: A13, D63, D64, D89
Suggested Citation: Suggested Citation