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Fairness Versus Efficiency: How Procedural Fairness Concerns Affect Coordination
University of Gothenburg, Department of Economics, Sweden.
University of Potsdam, Department of Economics, Germany.
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.
2016 (English)Report (Other academic)
Abstract [en]

What happens if a mechanism that aims at improving coordination treats some individuals unfairly? We investigate in a laboratory experiment whether procedural fairness concerns affect how well individuals are able to solve a coordination problem in a two-player Volunteer’s Dilemma. Subjects receive external action recommendations that can help them avoid miscoordination if followed by both players. One of the players receives a disadvantageous recommendation to volunteer while the other player receives a recommendation not to volunteer that gives her a payoff advantage if both players follow the recommendations they have received. We manipulate the fairness of the recommendation procedure by varying the probabilities of receiving a disadvantageous recommendation between players. We find that the recommendations improve overall efficiency regardless of their consequences for pay-off division. However, there are behavioral asymmetries depending on the recommendation received by a player: advantageous recommendations are followed less frequently than disadvantageous recommendations in case of actions that guarantee a low payoff. While there is no difference in acceptance of different recommendation procedures, beliefs about others’ actions are more pessimistic in the treatment with a procedure inducing unequal expected payoffs. Our data shows that beliefs about others’ behavior are correlated with one’s own behavior, however this is the case only when following recommendations is a strategy that involves payoff-uncertainty.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2016. , 40 p.
Linköping University Working Papers in Economics, 3
Keyword [en]
Coordination, Correlated equilibrium, Recommendations, Procedural fair- ness, Volunteer’s Dilemma, Experiment
National Category
URN: urn:nbn:se:liu:diva-125731OAI: diva2:908172
Available from: 2016-03-01 Created: 2016-03-01 Last updated: 2016-03-31Bibliographically approved

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Posadzy, Kinga
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