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Title:Social welfare versus inequality concerns in an incomplete contract experiment PDF Logo
Authors:Faravelli, Marco
Kirchkamp, Oliver
Rainer, Helmut
Issue Date:2010
Series/Report no.:CESifo working paper 2933
Abstract:We study a situation where two players first choose a sharing rule, then invest into a joint production process, and then split joint benefits. We investigate how social preferences determine investments. In our experiment we find that even the materially disadvantaged player cares more for social welfare than about inequality. Behavioral preferences of disadvantaged players actually increase inequality. We also investigate when players give up an advantageous sharing rule. Power-sharing can be successful in the experiment, even when it is not in a selfish world.
Subjects:experiments
incomplete contracts
relationship-specific investment
allocation of power
social preferences
JEL:C91
D23
D86
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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