Inequality and Other-Regarding Preferences and Risk Taking

Short Description: The proposed research addresses two key questions. First, we are interested in how the relative position in the income distribution affects other-regarding preferences and risk attitudes. Second, we examine whether and how these preferences change with a change in the income distribution.

Experimental Details: Two experiments were performed (a risk-taking experiment and a sharing experiment). Both experiments consisted of three parts. In the first part of both experiments, each respondent received information about their position in the income distribution relative to all respondents taking part in the experiment. That is, a respondent was either asked about his or her perception of inequality (i.e., the perceived location in the income distribution) or was given information about their actual location in the income distribution. The latter part utilized information on annual gross wages of all experimental respondents in the year prior to the experiment. In the second part, respondents received the instructions for the experiment (either the sharing or risk-taking experiment) and information about the payment details. The third part consisted of the actual experiment. In the risk-taking experiment, respondents were presented with five lottery tasks. The lotteries were visualized by boxes which displayed the possible amount of money that could be drawn as well as the associated probability of the draw (e.g., box 1: 50% €2 / 50% €3; box 2: 75% €5 / 25% €1). In each of the tasks, they had to pick one box (lottery) from which they would like to draw from (i.e., in total they choose five lotteries). The order of the lottery tasks was randomized at the individual level. In the sharing experiment, respondents made three independent decisions with anonymous recipients from three different income classes. For each decision, they received a certain amount of money and learned the income class of the recipient (bottom-, fifth- or top-income decile) before they decided how much of their endowment they want to share with this recipient. Again, the order of the three decisions was randomized. In both experiments, respondents learned about their payments immediately after they had made their last decision.

Incentives: In both experiments, a random device determined whether a respondent was actually paid.









Dietmar Fehr, Universität Heidelberg [E-Mail]




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