Fairness
Chapter 2 - Society
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Welcome to the Fairness page
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Deep dive
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Fairness in economic behaviour
Ernst Fehr investigated the role of fairness and reciprocity in economic behaviour. This research refutes the traditional economic assumption that people are driven solely by self-interest.
| Many influential economists, including Adam Smith (1759), Gary Becker (1974), Kenneth Arrow (1981), Paul Samuelson (1993) and Amartya Sen (1995), pointed out that people often do care for the well-being of others and that this may have important economic consequences. However, most economists still routinely assume that material self-interest is the sole motivation of all people. This practice contrasts sharply with a large body of evidence gathered by experimental economists and psychologists during the last two ecades. This evidence indicates that a substantial percentage of the people are strongly motivated by other-regarding preferences and that concerns for the well-being of others, for fairness and for reciprocity, cannot be ignored in social interactions.(1) |
His key findings are:
People are willing to sacrifice for fairness
Experiments such as the ultimatum game show that people are willing to give up money to reject unfair outcomes, even if this reduces their profits.
Reciprocity affects behaviour
In gift exchange games, employees reward generous wage offers with higher effort, showing that they respond to the employer's perceived fairness.
Punishment promotes cooperation
The ability to punish free riders leads to higher levels of cooperation in public goods games.
Intentions play a role
Respondents in the ultimatum game are more likely to reject low offers if they believe the bidder is intentionally unfair.
Neuroeconomic evidence
Brain research shows that people experience positive emotions when cooperating or punishing unfair behaviour, suggesting that fairness and reciprocity are intrinsic motivations.
| Content source | |
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| Ernst Fehr - A THEORY OF FAIRNESS, COMPETITION, AND COOPERATION - The Quarterly Journal of Economics - 1999 | |
| (1) | Ernst Fehr - THE ECONOMICS OF FAIRNESS, RECIPROCITY AND ALTRUISM – EXPERIMENTAL EVIDENCE AND NEW THEORIES - Handbook of the Economics of Giving, Altruism and Reciprocity, Volume 1 - 2006 |
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