Fairness in risky environments: theory and evidence

Abstrakt

Using three simple allocation problems generally known as dictator, ultimatum and trust games, we explore the influence of ex-ante unknown pie size of varying degrees of risk on individual behavior. We derive theoretical predictions for two of these games using utility functions that capture additively separable constant relative risk aversion and inequity aversion.

We test the theoretical predictions experimentally on two different subject pools: students of Czech Technical University and employees of Prague City Hall. We control for the risk attitude of our subjects through a variant of the Holt-Laury assessment instrument.

Klíčová slova

• Fairness
• risky
• environments:
• theory
• and
• evidence