78 E.E. Rutström, M.B. Williams J. of Economic Behavior Org. 43 2000 75–89
cost of revealing justice-based preferences is very low. It is more informative to see if such behavior survives at higher opportunity costs.
The basic experimental design involves two phases. In Phase I subjects are assigned a task which will determine their initial income entitlement in Phase II. They work at this task
individually. In Phase II subjects are brought together into groups of 12. Each subject is informed about the value of his initial income entitlement and how this has been determined.
He is then asked to choose the distribution rule that results in his preferred final distribution of income. Hence, subject decisions should not be influenced by risk attitudes as decisions
are made under complete information regarding income entitlements. Finally, to determine which distribution rule will determine the payoffs for the 12 subjects in the group, we
employ an incentive compatible mechanism called the Random Dictator rule under which everyone has the same chance of dictating the outcome and strategic considerations are
eliminated.
Our results are surprising in light of previous experimental evidence. We find that we cannot reject the hypothesis that self-interest is the sole motivation for subject behavior
in either of our earnings treatments. In our sample, 99 percent of subjects chose the dis- tribution rule which maximized their own final payoff. Because of the predominance of
apparently self-interested behavior, we implement an additional robustness test, comparing behavior under earned entitlements to behavior under a random entitlement mechanism. In
this session, we observe a slight increase in apparently non-self-interested behavior, albeit not in a way entirely consistent with earnings-based distributive preferences. The difference
is significant in the statistical sense, though the absolute magnitude is small. Despite this slight support for non-self-interested behavior, we conclude that the model of self-interest
in individual decision-making can explain our data very well.
The following section presents an overview of related literature. Section 3 details the experimental design, while the results are presented in Section 4. Conclusions and discussion
follow in Section 5.
2. Previous findings
2.1. Tests of distributive justice theory Several experiments have been designed with the direct purpose of testing theories of
distributive justice. These experiments employ group decision-making mechanisms based on unanimity or majority rule. Because of their focus on preferences behind a veil of
ignorance, these experiments employ incomplete information about initial entitlements, allowing risk attitudes to be a factor in determining outcomes.
7
The experiments documented in Frohlich et al. 1987a,b and Lissowski et al. 1991 incorporate random entitlement allocations, where all members are uncertain of their in-
come position and a unanimous agreement is required of the five-person committee after open discussions. In these studies, group decisions result in redistributions. Frohlich and
7
Beck 1994 explicitly tests for the influence of risk attitudes on distributive preferences. When using a Random Dictator mechanism, Beck finds almost no support for redistribution that cannot be explained by risk attitudes.
E.E. Rutström, M.B. Williams J. of Economic Behavior Org. 43 2000 75–89 79
Oppenheimer 1990 use a similar design but allocate initial entitlements according to per- formance in a task. Although their focus is not directly on testing how the earnings treatment
affects distributive preferences, the revealed group preferences appear to be similar to those observed when using the random allocation mechanism. The use of the unanimity rule,
however, does not allow one to observe individual preferences.
Beckman and Smith 1995 use a simple majority rule voting mechanism with full anonymity and a random entitlement allocation. There are two predetermined distribu-
tion options over which each five-person committee can vote. The majority rule decision mechanism allows for observation of individual preferences in addition to the group choice.
Subjects choose income distributions under both certainty and uncertainty of income entitle- ments. Beckman and Smith find that they cannot reject self-interested behavior. When initial
entitlements are uncertain, subjects reveal a high degree of support for transfers 40 percent voted in favor of redistribution, despite deadweight costs in the transfer mechanism. When
initial entitlements are certain, however, only 4 percent of subjects vote for transfers when the transfer would negatively impact their final payment. Thus, the proportion of subjects
that reveal choices that are apparently non-self-interested is very small.
2.2. Bargaining and dictator games Examples of apparently non-self-interested choices abound in the bargaining literature.
In ultimatum games such choices by proposers are frequently observed, but could be a result of the strategic nature of the game as proposers might fear that receivers will reject
low offers.
8
Nevertheless Kahneman et al. 1986 and Forsythe et al. 1992 find evidence of non-self-interested behavior in dictator games with a random allocation rule for initial
positions, where there is no issue of strategic interactions. This suggests that it is not the strategic aspect of the ultimatum bargaining games alone that causes such behavior. Hoffman
et al. 1994 also find that choices in the ultimatum game are not robust with respect to the rule used for allocating initial entitlements. When subjects earn the right to be the proposer
in an Ultimatum game, based on performance in a knowledge test, the median offer drops relative to when the right to be the proposer is randomly allocated. This lends some support
to equity theory, but fails to distinguish between equity based on effort and equity based on productivity.
Hoffman and Spitzer 1985 and Burrows and Loomes 1994 directly examine the effects on individual choices of random vs. earned initial entitlement allocations. In these studies,
the prediction that earned entitlements will be perceived differently than randomly allocated entitlements is attributed to John Locke
9
and referred to as “Lockean desert”. Burrows and Loomes 1994, p. 3 describe Lockean desert as “an entitlement to resources which have
been produced through the person’s expenditure of effort.” Hoffman and Spitzer 1985 model a two-person Coasian bargaining situation in which
one agent is designated the role of “controller” based on performance in a task. The task is an interactive two-person hash mark game. Essentially, the controller is endowed with
both the initial income entitlement and with the decision-making power. The dollar value of
8
See, for example, Güth et al. 1982 and Hoffman et al. 1994.
9
Locke 1978, Chapter 5.
80 E.E. Rutström, M.B. Williams J. of Economic Behavior Org. 43 2000 75–89
the entitlement is independent of which allocation rule is used, either random or earned; in particular, it is independent of the performance in the earned allocation rule. Hoffman and
Spitzer find a high proportion of equal-split outcomes in the random allocation treatment, even though an equal split makes the controller worse off than with the initial entitlement
value that would apply under a disagreement outcome. Hoffman and Spitzer find some reduction in this type of non-self-interested behavior when using the earned allocation rule,
but the outcomes are still mixed.
Hoffman and Spitzer emphasize the importance of effort in determining whether an individual deserves the entitlement in a Lockean sense. “The Lockean theory posits that an
individual deserves, as a matter of natural law, a property entitlement in resources that have been accumulated or developed through the individual’s expenditure of effort” p. 264 and,
hence, Lockean desert appears to be consistent with equity theory p. 265. Nevertheless, Hoffman and Spitzer also “think that a Lockean theory of property has room within it for
differences in efficacy of effort: even if two people spend the same amount of time or try as hard, the person who does a better job still deserves the resource” p. 273. In the Hoffman
and Spitzer experiments the role of controller is allocated according to performance as a measure of effort. Thus, in their design effort is defined as productivity.
The experimental design in Burrows and Loomes 1994 consists of a two-person trading environment. As in Hoffman and Spitzer, the decision-making power over redistributions
rests with the holding of initial income entitlements. Unlike Hoffman and Spitzer, however, the dollar value of entitlements depend on performance in the earnings phase. Burrows
and Loomes also find that allocating entitlements according to a task, rather than just ran- domly, affects bargaining outcomes. When initial entitlements are unequal, the proportion
of bargaining outcomes yielding equal splits of final payoffs falls when entitlements are earned relative to when they are random. At the same time, however, the proportion of equal
splits of the gains from trade increases. Burrows and Loomes suggest that their results may support a slightly revised version of Lockean desert theory, which they refer to as “two-part
desert”; desert derives not only from the effort that produces the allocation of initial entitle- ments, but also from effort in the bargaining process itself. Equal splits of gains from trade
correspond to a notion of just desert if the effort in the bargaining process is perceived to be equal across subjects.
3. Experimental design
