Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Alexander W. Cappelen
Just Luck: An Experimental Study of Risk Taking and Fairness.
(), James Konow
(), Erik Ø. Sørensen
() and Bertil Tungodden
Abstract: Choices involving risk significantly aect the
distribution of income and wealth in society, but there is probably no more
contentious question of justice than how to allocate the gains and losses
that inevitably result from risky choices. This paper reports the results
from the first experiment, to our knowledge, to study fairness views about
risk-taking, where the main aim is to examine whether people's fairness
considerations mainly focus on ex ante opportunities or ex post outcomes.
The experiment was a two stage dictator game where the distribution phase
was preceded by a risk-taking phase. Our analysis provides four main
findings. First, we show that even though many participants focus
exclusively on ex ante opportunities, the majority favors some
redistribution ex post. Second, we find that, among the participants who
redistribute ex post, a substantial share make a distinction between ex
post inequalities that reflect differences in luck and ex post inequalities
that reflect differences in choices. Third, we show that the appeal of the
ex ante view is independent of how costly it is to avoid exposure to risk.
Fourth, we find that the choices of stakeholders and impartial spectators
reflect the same set of fairness considerations.
Keywords: Risk-taking; fairness; luck; equal opportunities.; (follow links to similar papers)
JEL-Codes: D03; D30; D63; (follow links to similar papers)
19 pages, February 1, 2010
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