Fairness and learning: An experimental examination

Abstract

Over the last twenty years, experimental economists have identified a wide variety of games in which subjects display "other-regarding" behavior in violation of standard game theoretic predictions. The two primary approaches to explaining this behavior can be characterized as the "fairness hypothesis" and the "learning hypothesis." Both hypotheses provide an adequate explanation of behavior in existing experiments, but the two approaches rely on very different interpretations of the factors underlying subjects' behavior. In this paper, we examine experiments with a step-level public goods game designed to distinguish between the fairness and learning hypotheses. We find that neither approach provides an adequate explanation of the experimental data by itself. We propose a model which synthesizes the fairness and learning hypotheses. Using econometric analysis, we demonstrate that this model provides a significantly better fit to the experimental data. © 2002 Elsevier Science (USA). All rights reserved.