Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96540
Authors: 
Baquero, Guillermo
Smit, Willem
Wathieu, Luc
Year of Publication: 
2013
Series/Report no.: 
ESMT Working Paper 13-08
Abstract: 
We explore the interaction between fairness attitudes and reference dependence both theoretically and experimentally. Our theory of fairness behavior under reference-dependent preferences in the context of ultimatum games, defines fairness in the utility domain and not in the domain of dollar payments. We test our model predictions using a within-subject design with ultimatum and dictator games involving gains and losses of varying amounts. Proposers indicated their offer in gain- and (neatly comparable) loss- games; responders indicated minimum acceptable gain and maximum acceptable loss. We find a significant “generosity effect” in the loss domain: on average, proposers bear the largest share of losses as if anticipating responders' call for a smaller share. In contrast, reference dependence hardly affects the outcome of dictator games -where responders have no veto right- though we detect a small but significant “compassion effect”, whereby dictators are on average somewhat more generous sharing losses than sharing gains.
Subjects: 
Fairness
loss domain
ultimatum game
dictator game
referencedependent preferences
social preferences
JEL: 
D03
D81
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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