People Accept Unequal Outcomes If They Had An Equal Chance

Inequitable outcomes that people would otherwise reject are acceptable when they come about through ”fair procedures”, according to new research. The findings suggest that public acceptance of economic policies that promote efficiency at the expense of equity may be influenced by whether the policy creates a level playing field for determining winners and losers.

The experimental study – reported in the October 2005 issue of the Economic Journal – was carried out by an international team of economists from Germany, Spain and the United States. It involved a simple ultimatum bargaining game in which one person makes a proposal to split a sum of money – in this case about 12 euros – with a second person. The second person sees the offer and decides to accept or reject. Previous research has shown that a large number of people will reject the offer if it is highly inequitable, even though doing so leaves both people with no money.

This research posited that the acceptability of an inequitable offer might be influenced by the equity of the procedure for choosing it. So instead of having one of the bargainers name the offer, it was chosen by a roll of the dice. When the dice roll gave each bargainer an equal chance, an inequitable split was twice as acceptable as it was when chosen by a person: 41% instead of 19%. Hence an equitable procedure could overcome a losing player”s resistance to an inequitable outcome.

When the dice roll was biased in favour of one bargainer, an acceptance of the inequitable split by the bargainer with less chance was virtually unchanged from when a person decided the outcome. A separate part of the study shows that the option of using an equitable procedure in the game is sufficient to create resistance to inequitable outcomes.

The findings suggest that even the losers from economic policies that promote efficiency at the expense of equity can come to accept it if the outcome was the result of a level playing field in which they were given an equal chance. The researchers caution that this is a first study and follow-up studies to verify the results are necessary.

”Fair Procedures: Evidence from Games involving Lotteries” by Gary Bolton, Jordi Brandts and Axel Ockenfels is published in the October 2005 issue of the Economic Journal. Gary Bolton is at Penn State University. Jordi Brandts is at the Institut d”Anàlisi Econòmica (CSIC) in Barcelona. Axel Ockenfels is at the University of Cologne.

Jordi Brandts

+34-93-580-6612 | Jordi.Brandts@uab.cat