Preferences for redistribution in a relative effort game and information effects

Abstract

In this paper, we explore what determines preferences for redistribution in a relative effort game setting, and we show how an addition of information can lead people to re-optimize their choices for redistribution. We designed a lab experiment where the payment was determined by the relative effort put to work within a group. In this game setting, we show that self-interest is a highly significant motive that affects the individual preference for redistribution. Other than this motive, some of our subjects showed an insurance motive to avoid a potential risk. How fair subjects think of their payment was also a significant factor. When subjects were asked to decide whether to redistribute for another group, a majority answered consistently with the previous redistribution preference for their own group. Lastly, we find that the effect of an information nudge is different between high-paid subjects and low-paid subjects, and also between redistribution preferences for their own group and those for another group. Specifically, when we showed a figure which revealed the game payment distribution of their own group, more high-paid subjects chose to redistribute for their own group, and more low-paid subjects chose to redistribute for another group.