Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1214: Fairness in Winner-Take-All Markets

Björn Bartling , Alexander W Cappelen , Mathias Ekström (), Erik Ø. Sørensen and Bertil Tungodden
Additional contact information
Björn Bartling: Department of Economics, NHH – Norwegian School of Economics, Postal: and Department of Economics, University of Zurich
Alexander W Cappelen: Department of Economics, NHH – Norwegian School of Economics
Mathias Ekström: Department of Economics, NHH – Norwegian School of Economics, Postal: and Research Institute of Industrial Economics, Stockholm,
Erik Ø. Sørensen: Department of Economics, NHH – Norwegian School of Economics
Bertil Tungodden: Department of Economics, NHH – Norwegian School of Economics

Abstract: The paper reports the first experimental study on people’s fairness views on extreme income inequalities arising from winner-take-all reward structures. We find that the majority of participants consider extreme income inequality generated in winner-take-all situations as fair, independent of the winning margin. Spectators appear to endorse a “factual merit” fairness argument for no redistribution: the winner deserves all the earnings because these earnings were determined by his or her performance. Our findings shed light on the present political debate on redistribution, by suggesting that people may object less to certain types of extreme income inequality than commonly assumed.

Keywords: Winner-take-all reward structures; Fairness; Income inequality

JEL-codes: C91; D63

32 pages, May 7, 2018

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