Us and Them: Distributional Preferences in Small and Large Groups

Schumacher, Heiner; Kesternich, Iris; Kosfeld, Michael und Winter, Joachim (17. January 2014): Us and Them: Distributional Preferences in Small and Large Groups. SFB/TR 15 Discussion Paper No. 453

Abstract

We analyze distributional preferences in games in which a decider chooses the provision of a good that benefits a receiver and creates costs for a group of payers. The average decider takes into account the welfare of all parties and has concerns for efficiency. However, she attaches similar weights to small and large groups so that she neglects large provision costs that are dispersed among many payers. This holds regardless of whether the decider benefits from the provision or not. A CES utility function which rationalizes average behavior implies altruism in bilateral situations and welfare-damaging actions when costs are dispersed.

• Item Type: Paper
• Keywords: Social Preferences, Distribution Games, Concentrated Benefits and Dispersed Costs
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B5 - Weltwirtschaftliche Integration und die neue Firmenorganisation; Economics; Economics > Chairs > Chair of Empirical Economics
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: C91, D63, H00
• Language: English