Procedural Justice in Dictator Games Rethinking the Fairness Hypothesis

Procedural Justicein Dictator GamesRethinking the Fairness Hypothesis Mikhael Shor Vanderbilt University September 2006

Motivation • Economists recognizing value of distributive justice. • In many situations, how decisions are made is as important as what decisions are made. • The “fairness hypothesis” assumes only distributional concerns. • People have inherent value for “voice” or decision-making authority?

Inherited Literature • Frohlich, Oppenheimer & Kurki (2004) • Frohlich, Oppenheimer & Moore (2001) • Gale, Binmore & Samuelson (1993) • Gowdy, Iorgulescu & Onyeiwu (2003) • Guth (1995,1997) • Guth & Huck (1997) • Guth, Ockenfels & Tietz (1990) • Güth, Schmidt & Sutter (2003) • Güth, Schmittberger & Schwarze (1982) • Guth & Tietz (1986,1990) • Güth & Van Damme (1998) • Henrich (2000) • Henrich, et. al (2001) • Hoffman, et. al (1994). • Hoffman, McCabe & Smith. (1996) • Kahneman, Knetsch & Thaler (1986) • Kagel, Kim & Moser (1996) • Kagel & Wolfe (2001) • Kirchsteiger (1994) • Knez & Camerer (1995) • Kravitz & Gunto (1992) • Larrick & Blount (1997) • Meyer (1992) • Mitzkewitz & Nagel (1993) • Muller (2001) • Nelson (2002) • Nowak, Page & Sigmund (2000) • Ochs & Roth (1989) • Oosterbeek, Sloof & Kuilen (2003) • Paciotti & Hadley (2003) • Rapoport, Sundali & Potter (1992) • Riedl & Vyrastekova (2003) • Roth, et. al (1991) • Ruffle (1998) • Schmidt (2004) • Schmitt, et. al (2006) • Schotter, Weiss & Zapater (1996) • Sefton (1992) • Slonim & Roth (1998) • Solnick (2001) • Solnick & Schweitzer (1999) • Straub & Murnighan (1992) • Suleiman & Ramzi (1996] • Thaler (1988) • Weber, Camerer & Knez (2004) • Weg, Eythan & Smith (1992) • Winter & Zamir (2005) • Your Name Here • Abbink, et. al (2001) • Andreoni, Castillo & Petrie (2003) • Armantier (2006) • Ben-Ner, Kong & Putterman (2004). • Ben-Ner, et. al (2004). • Bereby-Meyer & Niederle (2005) • Blount (1995) • Bohnet & Frey (1999) • Bolton, Brandts & Ockenfels (2005) • Bolton & Zwick (1995) • Bolton, Zwick & Katok (1998) • Brandts and Solà (2001) • Brandstatter & Güth (2000) • Camerer & Thaler (1995) • Cameron (1999) • Carter & McAloon (1996) • Cason & Mui (1997) • Costa-Gomes & Zauner (1997) • Croson (1996) • Eckel & Grossman (1992,1996,1998) • Eckel & Gilles (1997) • Ensminger (2003) • Falk, Fehr & Fischbacher (2003) • Forsythe, et. al (1994)

Inherited Literature • Intentionality matters • Is an equal split available? • Is the proposer empowered with choice? (Falk, Fehr, and Fischbacher, 2001; Güth, Huck, and Muller, 2001; Brandts and Sola, 2001; Blount, 1995; Nelson, 2002) • A fair procedure may proxy for a fair allocation • Bolton, Brandts, and Ockenfels • Outcome fair a priori but always unfair ex post • Different view of procedural justice: • Make procedures endogenous • Allow one player the power to involve others • Goal: measure inherent value of procedural justice • Apart from distributive and strategic concerns

Treatments • A • A • m • m • B (c-m , m ) • acc • rej (c-m , m ) (0 , 0) Dictator Ultimatum

Treatments • A • A • A • A • A • B • m • m • m • m • B (c-m , m ) ( m , c-m ) (c-m , m ) • acc • rej (c-m , m ) (0 , 0) Dictator with Role Choice Empowerment

Hypotheses • Procedural justice matters • People will give up dictator power to empower other player • Will refocus thoughts on distributive justice • Why ought dictators be fair? • Modified dictator games will see higher offers than “standard” dictator game • Fairness hypothesis is not rejected • If “fairness” considers both distributive and procedural issues

Experimental Design • 472 subjects randomly assigned to a treatment • Recruited online (eLab) • Mean age: 38 • U.S. residents: 45% • College graduates: 50% • Amount: $10 • Procedural choice was common knowledge • Surveys: • Justice orientation: utilitarianism and formalism • Machiavellianism: cynicism and manipulative tactics

Results: Control Treatments Dictator Ultimatum 2.87 average 4.61

Result 1 People care about procedural justice • Dictator with Role Choice: • Of 54 subjects… • Empowerment: • Of 54 subjects…

Result 1 People care about procedural justice • Dictator with Role Choice: • Of 54 subjects… • 17 chose the other player to be the dictator 31% • Empowerment: • Of 54 subjects… • 33 gave the other player the ability to reject 61%

Result 2 Distributions are significantly more even in dictator games with procedural choice Empowerment Dictator With Role Choice 4.57 average 4.81

Average Offers by Game and Procedure Choice

Result 3 Even self-empowered dictators are more generous Self-appointed dictators Dictator w/ Role Choice Empowerment

Result 3 Even self-empowered dictators are more generous Self-appointed dictators Dictator w/ Role Choice Empowerment — Dictator Game

The Fairness Hypothesis • “If nontrivial offers are due solely to proposers’ concerns with fairness, the distribution will be the same in the two [Ult. And Dict.] games.” • Forsythe, Horowitz, Savin, and Sefton (1994) • Fairness: procedural and distributive • Stringent test: Will offers among self-empowered dictators be similar to ultimatum offers?

Result 4 The fairness hypothesis is alive and well. Self-appointed dictators Dictator w/ Role Choice Empowerment — Ultimatum Game

Latent Assumptions of the “Fairness Hypothesis” • Differences between dictator and ultimatum games +

Latent Assumptions of the “Fairness Hypothesis” • Differences between dictator and ultimatum games = +

Results: Justice Orientation • Differences between dictator and ultimatum games

Summary • Ultimatum game does reflect both distributional and strategic concerns • Dictator game does not reflect distributional concerns • The reason for earlier rejections of the fairness hypothesis? • Being fair, “procedurally,” important and distinct from allocation fairness

Procedural Justice in Dictator Games Rethinking the Fairness Hypothesis