Conventional benefit–cost analysis plays an important role in informing policy decisions, encouraging systematic investigation of the positive and negative impacts of alternative policies. It is based on strong normative assumptions, however. To measure individual wellbeing, the conventional approach relies on individuals’ willingness to exchange their income for the outcomes they experience. To measure societal welfare, it relies on simple aggregation of these values across individuals. In this “Ethics and Benefit–Cost Analysis” special issue, we explore alternative conceptions of individual and societal welfare, their application, and the implications, from both practical and ethical perspectives.

This paper reports the results of a ‘probabilistic dictator game’ experiment in which subjects were given an option to share chances to win a prize with a dummy player. Using a within-subject design we manipulated two aspects of the decision, the relative cost of sharing and the nature of the lottery: the draws were either independent for the two players (‘noncompetitive’ condition) or one's success meant other's failure (‘competitive’ condition). We also asked for decisions in a standard, non-probabilistic, setting. The main results can be summarized as follows: first, a substantial fraction of subjects do share chances to win, also in the competitive treatments, thus showing concern for the other player that cannot be explained by outcome-based models. Second, subjects share less in the competitive treatment than in other treatments, indicating that procedural fairness alone cannot explain the data. Overall, these results suggest that models aiming at generalizing social concerns to risky environments will have to rely on a mix of distributive and procedural fairness.

This study examines fairness perceptions in ultimatum bargaining games with asymmetric payoffs, outside options, and different information states. Fairness perceptions were dependent on treatment conditions. Specifically, when proposers had higher chip values, dollar offers were lower than when responders had higher chip values. When responders had an outside option, offers were higher and were rejected less often than when proposers had an outside option. However, a given offer was rejected more often when responders had an outside option. Therefore, similar to the first mover advantage, the “advantaged” or “entitled” player received a higher monetary payoff than they would otherwise. When there was complete information about payoff amounts (payoff conversion rates and outside options), rejections occurred more often, and given offer amounts were rejected more often than when there was incomplete information. When there was incomplete information, offers were higher in the initial rounds than in the final rounds. These results suggest that proposers made offers strategically, making offers that would not be rejected, rather than out of a concern for fairness.

Many prior studies have identified that subjects in experiments demonstrate preferences for fair allocations. We present an experimental study designed to test whether a similar concern for fairness manifests itself when the decision maker is choosing among differing probabilistic allocation mechanisms that will all generate an ex post unfair allocation by assigning an indivisible prize to one individual. This investigation is inspired by Karni and Safra (Econometrica, 70, 263-284, 2002) in which a structure for preferences for fairness in such an environment was developed. Here we use this model to design experiments that allow us to test for the presence of concern for fairness in individual choice behavior and examine some factors that may affect the intensity of the concern for fairness.

We extend the study of procedural fairness in three new directions. Firstly, we focus on lotteries determining the initial roles in a two-person game. One of the roles carries a potential advantage over the other. All the experimental literature has thus far focused on lotteries determining the final payoffs of a game. Secondly, we modify procedural fairness in a dynamic—i.e. over several repetitions of a game—as well as in a static—i.e. within a single game-sense. Thirdly, we analyse whether assigning individuals a minimal chance of achieving an advantaged position is enough to make them willing to accept substantially more inequality. We find that procedural fairness matters under all of these accounts. Individuals clearly respond to the degree of fairness in assigning initial roles, appraise contexts that are dynamically fair more positively than contexts that are not, and are generally more willing to accept unequal outcomes when they are granted a minimal opportunity to acquire the advantaged position. Unexpectedly, granting full equality of opportunity does not lead to the highest efficiency.

We investigate in a laboratory experiment whether procedural fairness concerns affect how well individuals are able to solve a coordination problem in a two-player Volunteer’s Dilemma. Subjects receive external action recommendations, either to volunteer or to abstain from it, in order to facilitate coordination and improve efficiency. We manipulate the fairness of the recommendation procedure by varying the probabilities of receiving the disadvantageous recommendation to volunteer between players. We find evidence that while recommendations improve overall efficiency regardless of their implications for expected payoffs, there are behavioural asymmetries depending on the recommendation: advantageous recommendations are followed less frequently than disadvantageous ones and beliefs about others’ actions are more pessimistic in the treatment with recommendations inducing unequal expected payoffs.

This paper reports three experiments with triadic or dyadic designs. The experiments include the moonlighting game in which first-mover actions can elicit positively or negatively reciprocal reactions from second movers. First movers can be motivated by trust in positive reciprocity or fear of negative reciprocity, in addition to unconditional other-regarding preferences. Second movers can be motivated by unconditional other-regarding preferences as well as positive or negative reciprocity. The experimental designs include control treatments that discriminate among actions with alternative motivations. Data from our three experiments and a fourth one are used to explore methodological questions, including the effects on behavioral hypothesis tests of within-subjects vs. across-subjects designs, single-blind vs. double-blind payoffs, random vs. dictator first-mover control treatments, and strategy responses vs. sequential play.

We run a laboratory experiment to test the concept of coarse correlated equilibrium (Moulin and Vial in Int J Game Theory 7:201–221, 1978), with a two-person game with unique pure Nash equilibrium which is also the solution of iterative elimination of strictly dominated strategies. The subjects are asked to commit to a device that randomly picks one of three symmetric outcomes (including the Nash point) with higher ex-ante expected payoff than the Nash equilibrium payoff. We find that the subjects do not accept this lottery (which is a coarse correlated equilibrium); instead, they choose to play the game and coordinate on the Nash equilibrium. However, given an individual choice between a lottery with equal probabilities of the same outcomes and the sure payoff as in the Nash point, the lottery is chosen by the subjects. This result is robust against a few variations. We explain our result as selecting risk-dominance over payoff dominance in equilibrium.

We investigate the external validity of giving in the dictator game by using the misdirected letter technique in a within-subject design. First, subjects participated in standard dictator games (double blind) conducted in labs in two different studies. Second, after four to five weeks (study 1) or two years (study 2), we delivered prepared letters to the same subjects. The envelopes and the contents of the letters were designed to create the impression that they were misdirected by the mail delivery service. The letters contained 10 Euros (20 Swiss Francs in study 2) corresponding to the endowment of the in-lab experiments. We observe in both studies that subjects who showed other-regarding behavior in the lab returned the misdirected letters more often than subjects giving nothing, suggesting that in-lab behavior is related to behavior in the field.

This paper studies the effects of social status—a socially recognized ranking of individuals—on prosocial behavior. We use a laboratory experiment and propose a theory to address this issue. In a one-shot game, two players, whose social status is either earned or randomly assigned, jointly make effort contributions to a project. Player 1 first suggests an effort level for each player to player 2 who then determines the actual effort levels. Deviation from the proposal is costly. We find causal evidence that high-status players are less selfish than their low-status counterparts. In particular, high-status players 2 provide relatively more effort, ceteris paribus, than those with low status. The experimental results and theoretical framework suggest that a high social ranking yields more social behavior and that this can be attributed to the sense of responsibility that it gives.

Experimental dictator games have been used to explore unselfish behaviour. Evidence is presented here, however, that subjects’ generosity can be reversed by allowing them to take a partner's money. Dictator game giving therefore does not reveal concern for consequences to others existing independently of the environment, as posited in rational choice theory. It may instead be an artefact of experimentation. Alternatively, evaluations of options depend on the composition of the choice set. Implications of these possibilities are explored for experimental methodology and charitable donations respectively. The data favour the artefact interpretation, suggesting that demand characteristics of experimental protocols merit investigation, and that economic analysis should not exclude context-specific social norms.

John Stuart Mill claimed that “men do not desire merely to be rich, but richer than other men.” Are people made happy by being richer than others? Or are people made happy by favorable comparisons to others more generally, and being richer is merely a proxy for this ineffable relativity? We conduct an online experiment absent choice in which we measure subjective well-being (SWB) before and after an exogenous shock that reveals to subjects how many experimental points they and another subject receive, and whether or not points are worth money. We find that subjects are made significantly happier when they receive monetized rather than non-monetized points, suggesting money is valued more than the points it represents. In contrast, subjects are made equally unhappy when they receive fewer monetized points as when they receive fewer non-monetized points than others, suggesting relative money is not valued more than the relative points it represents. We find no evidence that subjects are made happier by being “richer” than others (i.e., by receiving more points—either monetized or non-monetized—than others). Subgroup analyses reveal women are made unhappier (than men) by being “richer” and “poorer” than others, and conservatives are made unhappier (than progressives) by being “poorer” than others. Our experimental-SWB approach is easy to administer and may complement choice-based tasks in future experiments to better estimate preference parameters.

A reciprocal action is an action meant to have a similar influence on another's payoff as another's action has on one's own. One hypothesis asserts that reciprocal action is triggered by the reciprocator's belief that another's action was good or ill intended. The other hypothesis says that the reciprocator is simply acting to implement fixed preferences over payoff allocations. We report on an experiment that allows us to study both positive (reward) and negative (punishment) reciprocal action in a single framework. Knowing the preferences for payoff allocations is sufficient to account for nearly all the reciprocal action we observe in our experiment.

We investigate the role of intentions in two-player two-stage games. For this purpose we systematically vary the set of opportunity sets the first mover can choose from and study how the second mover reacts not only to opportunities of gains but also of losses created by the choice of the first mover. We find that the possibility of gains for the second mover (generosity) and the risk of losses for the first mover (vulnerability) are important drivers for second mover behavior. On the other hand, efficiency concerns and an aversion against violating trust seem to be far less important motivations. We also find that second movers compare the actual choice of the first mover and the alternative choices that would have been available to him to allocations that involve equal material payoffs.

We investigate whether informal support is sensitive to the extent to which individuals can influence their income risk exposure by opting into risk. In a laboratory experiment with slum dwellers in Nairobi, we measure subjects’ transfers to a worse-off partner under both random assignment, and self-selection into a safe or risky project. Our experimental design allows us to discriminate between different possible explanations for why giving behaviour might change when risk exposure is self-selected. We find that solidary support is independent of the partners’ choice of risk exposure, which contradicts attributions of responsibility for neediness and ex-post choice egalitarianism. Instead, we find that support depends on donors’ risk preferences. Risk-takers seem to feel less obliged to share the profits they earn from their choices compared to subjects who earn equally high profits by pure luck. Our results have important implications for anti-poverty policies that aim at encouraging risky investments.

Do principals' distributive preferences affect the allocation of incentives within firms? We run a Principal-Agent lab experiment, framed as a firm setting. In the experiment, subjects are randomized in the principal or worker position. Principals must choose piece rate wage contracts for two workers that differ in terms of ability. Workers have to choose an effort level that is non-contractible. Principals are either paid in proportion to the output produced (Stakeholder treatment) or paid a fixed wage (Spectator treatment). We study how principals make trade-offs between incentive concerns (motivating workers to maximize output) and their own normative distributive preferences. We find that, despite the firm-frame and the moral hazard situation, principals do hold egalitarian concerns, as principals are on average willing to trade off their firm's performance (and so their own income) for more wage equality among their workers. The willingness to reduce inequality among workers is sensitive to both extensive and intensive margin incentives, which shows that principals' choices are shaped by incentives that they face themselves.

We study the distributional preferences of Americans during 2013–2016, a period of social and economic upheaval. We decompose preferences into two qualitatively different tradeoffs—fair-mindedness versus self-interest, and equality versus efficiency—and measure both at the individual level in a large and diverse sample. Although Americans are heterogeneous in terms of both fair-mindedness and equality-efficiency orientation, we find that the individual-level preferences in 2013 are highly predictive of those in 2016. Subjects that experienced an increase in household income became more self-interested, and those who voted for Democratic presidential candidates in both 2012 and 2016 became more equality-oriented.

We study distributional preferences in adolescent peer networks. Using incentivized choices between allocations for themselves and a passive agent, children are classified into efficiency-loving, inequality-loving, inequality-averse, and spiteful types. We find that pairs of students who report a friendship link are more likely to exhibit the same preference type than other students who attend the same school. The relation between types is almost completely driven by inequality-loving and spiteful types. The role of peer networks in explaining distributional preferences goes beyond network composition effects. A low rank in academic performance and a central position within the network relate positively to a higher likelihood of being classified as spiteful. Hence, social hierarchies seem to be correlated with distributional preference types.

The fact that criminal behavior typically has negative consequences for others provides a compelling reason to think that criminals lack prosocial motivation. This paper reports the results from two dictator game experiments designed to study the prosocial motivation of criminals. In a lab experiment involving prisoners, we find a striking similarity in the prosocial behavior of criminals and non-criminals, both when they interact with criminals and when they interact with non-criminals. Similarly, in an Internet experiment on a large sample from the general population, we find no difference in the prosocial behavior of individuals with and without a criminal record. We argue that our findings provide evidence of criminals being as prosocially motivated as non-criminals in an important type of distributive situations.

Game theory predicts that players make strategic commitments that may appear counter-intuitive. We conducted an experiment to see if people make a counter-intuitive but strategically optimal decision to avoid information. The experiment is based on a sequential Nash demand game in which a responding player can commit ahead of the game not to see what a proposing player demanded. Our data show that subjects do, but only after substantial time, learn to make the optimal strategic commitment. We find only weak evidence of physical timing effects.