Just Luck: An Experimental Study of Risk-Taking and Fairness

Cappelen, Alexander W., James Konow, Erik Ø. Sørensen, and Bertil Tungodden. 2013. “Just Luck: An Experimental Study of Risk-Taking and Fairness." American Economic Review, 103(4): 1398-1413. DOI: 10.1257/aer.103.4.1398; Online Appendix (307.82 KB) | Download Data Set (215.97 KB)


Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risktaking, specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes. We find that, even though many participants focus exclusively on ex ante opportunities, most favor some redistribution ex post. Many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. These findings apply to both stakeholders and impartial spectators.

Equity and Efficiency in Multi-Worker Firms: Insights from Experimental Economics

Date: 2011-05
By: Abeler, Johannes (University of Nottingham)
Altmann, Steffen (IZA)
Goerg, Sebastian (Max Planck Institute for Research on Collective Goods)
Kube, Sebastian (University of Bonn)
Wibral, Matthias (University of Bonn)
URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp5727&r=net
In this paper, we discuss recent evidence from economic experiments that study the impact of social preferences on workplace behavior. We focus on situations in which a single employer interacts with multiple employees. Traditionally, equity and efficiency have been seen as opposing aims in such work environments: individual pay-for-performance schemes maximize efficiency but might lead to inequitable outcomes. We present findings from laboratory experiments that show under which circumstances partially incomplete contracts can create equitable work environments while at the same time reaching surprisingly efficient outcomes.
Keywords: incentives, wage setting, equity, gift exchange, reciprocity, incomplete contracts, organizational economics, laboratory experiments
JEL: J33