Measuring Inequity Aversion in a Heterogeneous Population Using Experimental Decisions and Subjective Probabilities

We combine choice data in the ultimatum game with the expectations of proposers elicited by subjective probability questions to estimate a structural model of decision making under uncertainty. The model, estimated using a large representative sample of subjects from the Dutch population, allows bot...

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Vydáno v:	Econometrica Ročník 76; číslo 4; s. 815 - 839
Hlavní autoři:	Bellemare, Charles, Kröger, Sabine, van Soest, Arthur
Médium:	Journal Article
Jazyk:	angličtina
Vydáno:	Oxford, UK Econometric Society 01.07.2008 Blackwell Publishing Ltd Blackwell
Témata:	Applications Decision making Decision making models Dictators Economic expectations Economic forecasting models Economic models Exact sciences and technology Expectations Game theory Heterogeneity Inequality inequity aversion Inference from stochastic processes; time series analysis Insurance, economics, finance Mathematics Modeling P values Preferences Probability Probability and statistics Probability theory and stochastic processes Return on investment Sciences and techniques of general use Socioeconomic status Statistics Stochastic processes Studies subjective expectations Subjectivity Transponders Ultimatum game Uncertainty Vocational education Netherlands Decision making Prediction Large sample Prediction theory Statistical estimation Probability distribution Preference theory Stochastic process Subjective probability Concave function Statistical method Heterogeneity Increasing function inequity aversion Ultimatum game Structural model Filtering theory Expectation Econometrics subjective expectations Payoff function
ISSN:	0012-9682, 1468-0262
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Popis
Shrnutí:	We combine choice data in the ultimatum game with the expectations of proposers elicited by subjective probability questions to estimate a structural model of decision making under uncertainty. The model, estimated using a large representative sample of subjects from the Dutch population, allows both nonlinear preferences for equity and expectations to vary across socioeconomic groups. Our results indicate that inequity aversion to one's own disadvantage is an increasing and concave function of the payoff difference. We also find considerable heterogeneity in the population. Young and highly educated subjects have lower aversion for inequity than other groups. Moreover, the model that uses subjective data on expectations generates much better in- and out-of- sample predictions than a model which assumes that players have rational expectations.
Bibliografie:	A previous version of this paper was circulated under the title “Actions and Beliefs: Estimating Distribution Based Preferences Using a Large Scale Experiment With Probability Questions on Expectations.” We thank Vera Toepoel and Marcel Das and his team at CentERdata for support throughout the experiment. We are also grateful for the comments from participants at the Princeton workshop in econometrics and experimental economics, the 2005 ESA North American Meeting in Tucson, the 2006 ESEM meeting in Vienna, seminar participants at Concordia University, Montréal, Queens University, Kingston, Free University, Brussels, and Tor Vergata University, Rome, three anonymous referees, and a co‐editor. The first author thanks the Canada Chair of Research in the Economics of Social Policies and Human Resources for support. The second author thanks the Economic Science Laboratory at the University of Arizona for their kind hospitality. SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 14
ISSN:	0012-9682 1468-0262
DOI:	10.1111/j.1468-0262.2008.00860.x