Procedural Justice in Dictator Games Rethinking the Fairness Hypothesis Mikhael Shor Vanderbilt University September 2006

ESA 29 September 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?

ESA 29 September Inherited Literature 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) 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

ESA 29 September 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

ESA 29 September  rej mm Treatments AA BB  acc (c-m, m ) (0, 0) mm AA (c-m, m ) Dictator Ultimatum

ESA 29 September  rej mm mm Treatments AA (c-m, m ) AA AA BB  acc (c-m, m ) (0, 0) mm mm AA (c-m, m ) AA BB ( m, c-m ) Dictator with Role Choice Empowerment

ESA 29 September  rej mm mm Treatments AA (c-m, m ) AA AA BB  acc (c-m, m ) (0, 0) mm mm AA (c-m, m ) AA BB ( m, c-m ) Dictator with Role Choice Empowerment

ESA 29 September 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

ESA 29 September 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

ESA 29 September Results: Control Treatments 2.87 average 4.61 DictatorUltimatum

ESA 29 September Result 1 People care about procedural justice  Dictator with Role Choice: Of 54 subjects…  Empowerment: Of 54 subjects…

ESA 29 September 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%

ESA 29 September Result 2 Distributions are significantly more even in dictator games with procedural choice Dictator With Role Choice Empowerment 4.57 average 4.81

ESA 29 September Average Offers by Game and Procedure Choice GameAverage Offer (std. dev) Dictator2.87 (2.26) Dictator with Role Choice4.57 (1.63) Kept dictator role for self4.59 (1.38) Given dictator role by other4.53 (2.12) Empowerment4.81 (1.85) Gave power of rejection5.30 (1.47) Did not give power of rejection4.05 (2.13) Ultimatum4.61 (1.59)

ESA 29 September Average Offers by Game and Procedure Choice GameAverage Offer (std. dev) Dictator2.87 (2.26) Dictator with Role Choice4.57 (1.63) Kept dictator role for self4.59 (1.38) Given dictator role by other4.53 (2.12) Empowerment4.81 (1.85) Gave power of rejection5.30 (1.47) Did not give power of rejection4.05 (2.13) Ultimatum4.61 (1.59)

ESA 29 September Average Offers by Game and Procedure Choice GameAverage Offer (std. dev) Dictator2.87 (2.26) Dictator with Role Choice4.57 (1.63) Kept dictator role for self4.59 (1.38) Given dictator role by other4.53 (2.12) Empowerment4.81 (1.85) Gave power of rejection5.30 (1.47) Did not give power of rejection4.05 (2.13) Ultimatum4.61 (1.59)

ESA 29 September Result 3 Even self-empowered dictators are more generous Self-appointed dictators Dictator w/ Role Choice Empowerment

ESA 29 September Result 3 Even self-empowered dictators are more generous — Dictator Game Self-appointed dictators Dictator w/ Role Choice Empowerment

ESA 29 September 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?

ESA 29 September Result 4 The fairness hypothesis is alive and well. Self-appointed dictators Dictator w/ Role Choice Empowerment — Ultimatum Game

ESA 29 September Latent Assumptions of the “Fairness Hypothesis” Differences between dictator and ultimatum games Ultimatum DictatorUltimatumDictator Utilitarianism ++ Formalism Cynicism Tactics Constant +

ESA 29 September Latent Assumptions of the “Fairness Hypothesis” Differences between dictator and ultimatum games Ultimatum DictatorUltimatumDictator Utilitarianism ++ Formalism Cynicism Tactics Constant 00 + =

ESA 29 September Results: Justice Orientation Differences between dictator and ultimatum games Ultimatum DictatorUltimatumDictator Utilitarianism 0.798** 0.681* Formalism Cynicism 0.736* Tactics Constant

ESA 29 September Results: Justice Orientation Differences between dictator and ultimatum games Ultimatum DictatorUltimatumDictator Utilitarianism 0.798** * Formalism ** * Cynicism 0.736* Tactics Constant

ESA 29 September 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