Favorable Interpretations of Ambiguity and Unstable Preferences for Fairness

38 Pages Posted: 22 Jul 2004

See all articles by Emily Celia Haisley

Emily Celia Haisley

Yale School of Management

Roberto A. Weber

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: June 2004

Abstract

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

Haisley, Emily Celia and Weber, Roberto A., Favorable Interpretations of Ambiguity and Unstable Preferences for Fairness (June 2004). Available at SSRN: https://ssrn.com/abstract=567305 or http://dx.doi.org/10.2139/ssrn.567305

Emily Celia Haisley (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Roberto A. Weber

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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