Faculty Scholarship 1994 - Present

An Experimental Approach to the Economics of Fairness

This is a short literature review with commentary of recent literature pertaining to the economics of fairness. Mainstream economics assumes individuals act out of rational self-interest and obey the rules of the economic games they play. Neo-Hobbesians argue that these are incompatible assumptions and insist that economics systematically explore rule violation and costs of enforcing rules. Game theory experiments are being used to attack both mainstream and neo-Hobbesian assumptions about rational self-interested behavior and its results. Prisoner's Dilemma experiments suggest that in many environments cooperative behavior leads to better results for users than Hobbesian agression. Ultimatum Game and Public Goods experiments suggest that many individuals act fairly and punish unfair behavior by others even when these actions are costly to the actor and cannot be justified on grounds of rational self-interest.