Inequity Aversion and Strategic Considerations: An Experimental Investigation

We identify one attribute of games used in within-subject tests of the inequity aversion model of Fehr and Schmidt (1999), and test its significance. The impact of strategic considerations in games used to evaluate the predictive power of other-regarding preferences is analysed by recovering subject’s inequity aversion parameters in ultimatum and dictator games, with and without strategic consideration. A public good game is employed to test the predictive power of the recovered parameters. Our result indicate that people are by and large driven by reciprocity motives in strategic games and aversion against distributional inequity in non-strategic games. These motives seem to be correlated within games regarding advantageous inequity aversion, but not regarding inadvantageous inequity aversion.