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Title:Social welfare versus inequality aversion in an incomplete contract experiment PDF Logo
Authors:Faravelli, Marco
Kirchkamp, Oliver
Rainer, Helmut
Issue Date:2009
Series/Report no.:Jena economic research papers 2009,016
Abstract:We explore experimentally how power asymmetries between partners affect relationship-specific investments. We find that on average players' investments are larger than equilibrium investments. In contrast to social dilemma experiments, in our experiment preferences for social welfare and those for equality call for different actions. Surprisingly, even disadvantaged players care more for social welfare and less for equality. As a result social welfare increases but so does inequality. We then study conditions under which power-advantaged players give up power. 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:Jena Economic Research Papers, MPI für Ökonomik

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