1. Justice and Fairness Karl Schurter Interdisciplinary Center for Economic Science Methods Subjects Eighty-four George Mason University undergraduate students were recruited for an experiment in economic decision-making. The subjects had never participated in an extensive-form game before this experiment. They were paid $7 at the door for showing up on time and they were also paid according to their actual income during the course of the experiment. The experiment was single-blind. Procedure As they entered the room, the subjects were given their show up fee as they were seated at visually isolated computer terminals. They then read a set of on-screen instructions. At the end of the instructions, they were asked to enter their name and decide to leave or stay for the entire experiment. In keeping with the idea of consent to a social contract, they were not allowed to change their minds later. Dictator Game The subjects participated in a version of the dictator game (DG). In the DG, there is first an entitlement stage in which the subjects are assigned to be either Player A or Player B. Player A is then given an endowment, which he is responsible for dividing between himself and his counterpart, Player B. He may give any whole number amount between zero and e, the size of the endowment. Player B must accept Player A’s allocation no matter what. This design allows for insight into the subjects’ opinions regarding their desert relative to their counterparts’ without the confounding effects of bargaining or some form of reciprocation. The entitlement stage of the game varied across the four treatments. After the entitlement stage, all the subjects played the same dictator game with a $16 endowment. Treatments Unannounced: Subjects were simply told whether they were a Player A or B upon completion of the instructions. This is the basic form of the dictator game and serves as the control. The typical distribution of offers from Player A’s is bimodal at the theoretically predicted outcome (e, 0) and the cooperative outcome (.5e,.5e). The distribution is roughly uniform in between. The average offer is between 20% and 30% of the endowment. Die Roll: Player A is randomly decided by a game of chance. Immediately after all the players are ready to begin, two buttons labeled “Even” and “Odd” appear on their screens. Only one person from each partnership is allowed to select each option. After everyone has made a selection, the experiment monitor rolls a six-sided die at the front of the room and announces the result aloud after asking on of the subjects to confirm. The person in each pair who correctly guesses the outcome becomes Player A. The purpose of this treatment is to make the fair procedure more prominent in the minds of the subjects. Quiz: The players take a trivia quiz containing general questions about George Mason University and its history. Their rank is based on their scores on the quiz, with ties being decided by giving the higher rank to the person who finished the quiz first. Player A’s are the top ranking half of the group and are paired with the lower ranking half such that the highest ranking Player A is matched with the lowest ranking Player B. At no point do the subjects know their actual rank. They only know if they are a Player A or B. Seniority: The players are ranked by seniority based upon the credit hours they have completed or are currently taking. For privacy reasons, we do not ask the students to supply a transcript. Instead, we ask them to volunteer this information before they know what the information will be used for so that they will not be tempted to be dishonest. Player A’s are the top ranking half of the group and are paired with the lower ranking half such that the highest ranking Player A is matched with the lowest ranking Player B. At no point do the subjects know their actual rank. They only know if they are a Player A or B. Results The Unannounced, Die Roll, Seniority, and Quiz treatments contained 20, 22, 22, and 22 pairs, respectively. Fig 1. contains summary statistics from each treatment. Fig. 2-5 and Fig. 6 depict the offer distributions, both as histograms and cumulative frequency distributions. Fig. 7 summarizes the test statistic and the critical value for each the pair-wise Kolmogorov-Smirnov (KS) tests. The KS test is a nonparametric distributions test, and the distributions are statistically significant if the test statistic is greater than or equal to the critical value. However, because the sample sizes are less than 25, there is less power to test (samples are considered large when both samples are greater than 25). The Kruskal-Wallis one-way analysis of variance showed that at least one treatment was different from the others (p =.022). The Wilcoxon-Mann-Whitney medians test was used for pair-wise comparisons between treatments. The resulting p-values are summarized in Fig. 8. Average Offer (percent of endowment) Median Offer (percent of endowment) Unannounced$5.70 (35%)$6.00 Die Roll$5.45 (34%)$6.50 Quiz$3.77 (24%)$3.50 Seniority$2.95 (18%)$2.00 Figure 1 Figure 2 Figure 3 Figure 4Figure 5

2. Background The most important component of this experiment is a clear definition of terms. The following definitions were based on modern philosophical, political, and legal thinking: Justice, within the context of distributive justice, is a hierarchical approach to an allocation in which those with greater merit receive proportionally more of the scarce resource, i.e. everyone receives his or her “just desert.” Fairness is egalitarianism. The word “fair” connotes equity, and can refer to equal reward or to equal opportunity. A Fair Procedure is a method of establishing desert that ensures equal opportunity. A previous study with human subjects has shown that a fair procedure that results in inequities is a suitable alternative to equal reward, and vice versa. Desert is a justifiable property right, a claim to ownership of a resource that has been validated by one’s greater merit or by a fair procedure. Abstract “Justice” and “fairness” are often used interchangeably in current economic research, but they carry distinct connotations. Foreign languages borrow the word “fair” from the english language for that reason. The common phrase “That is not fair” translates to “Das ist nicht fair” in German or “To nie fair” in Polish. This research presents an empirical study that tests the behavioral impacts of justice and fairness on human subjects and attempts to answer the question of whether they are, in fact, different motivational forces in economic decision-making. Results indicate that justice derived from an individual’s sense of greater merit has a greater impact on decision-making. Figure 6 Un.Die RollQuizSeniority Unannounced 0.412*0.037*0.005* Die Roll 0.047*0.008** Quiz 0.277** Seniority *one-tailed **two-tailed Figure 8 Un.Die RollQuizSeniority Unannounced50 (176)*132 (176)*212 (176)* Die Roll 132 (198)*198 (198)** Quiz 88 (198)** Seniority *one-tailed **two-tailed Figure 7 Conclusions Justice and fairness are separate concepts in the minds of the subjects when they are playing the dictator game. Only justice gives good reason for offering less of the initial endowment. It accounts for all self-regarding behavior in the dictator game. Fairness does not account for any self-regarding behavior in the dictator game.