Journal of Economic Research (Tahghighat- E- Eghtesadi)

Journal of Economic Research (Tahghighat- E- Eghtesadi)

Social Preferences Modeling in Experimental Economics: Introduction and Experimental Evaluation

Document Type : Research Paper

Authors
Alireza jalili Marand 1
Mohamad ali Motafakker Azad 2
Firuz Fallahi 3
1 Ph.D. Student, University of Tabriz
2 Department of Economics, University of Tabriz
3 Associate Professor, University of Tabriz
10.22059/jte.2017.219700.1007380
Abstract
Economic analysis is usually based on the assumption that individuals seek to maximize personal or individual interest. There are, however, evidence and phenomena in some of the economic experiments that cannot be interpreted and explained solely on the basis of personal interest. To explain contrary result of experiments some models arise by considering those motivations beside the selfishness such as fairness, reciprocity and altruism. Three types of these models are introduced in this paper. The first and second models are based on fairness and inequality aversions. In the third model, it is assumed that individuals maximize total payoff. To test the validity of models, a two person distributional experiment is designed in the form of a dictator game. The test was performed for two groups of students. The results show that a significant proportion of individuals choose fairness outcome versus self-interest, in the expense of own payoff. To evaluate the robustness of result, the experiment was repeated for another group, with the difference that this time, if the fair one is chosen, not only will the person receive less money, but also the total surplus reduces. Nevertheless a significant proportion of people choose a fair option.
JEL Classification: C7, A13, D63, D64
Keywords
Self-Interest
Fairness
Efficiency
Experiment
Dictator Game
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  • Receive Date 07 November 2016
  • Revise Date 25 November 2017
  • Accept Date 26 December 2017