Heterogeneity in views on fairness and equality

The project studies the heterogeneity of non-standard preferences and beliefs about economic outcomes. The proposed research considers deviations from the standard economic model in two aspects; first, the rationality of expectations and the best-response property of expectations; second, the assumption that the economic agent’s objective is given by his/her own consumption. While the standard model is often a useful simplification and serves as a benchmark model, it is by now well established that it is inconsistent with experimental and field-empirical data. Behavioural economics aims at providing predictions that are more realistic, primarily through the introduction and analysis of non-standard preferences and biases in expectations. Assuming that everyone deviates from the standard model in the same way is, however, also clearly inconsistent with data patterns from the laboratory and the field. For example, there is little gain in realism by assuming that everyone is altruistic, and in particular that everyone is altruistic to the same degree. Therefore, gains in realism can only be achieved by taking the heterogeneity of preferences and beliefs into account. The project combines the expertise of Bertil Tungodden and his collaborators in studying the heterogeneity of different fairness standards through structural modelling approaches with analyses of the separate impact of different dimensions of non-standard preferences and belief biases. A repeated object of investigation are income distributions and their perceptions by economic agents. Similar approaches are used by a number of researchers in the CRC’s projects A01 (headed by Dirk Engelmann and Joachim Winter) and A02 (headed by Christoph Breunig, Peter Haan, and Georg Weizsäcker). The Einstein Visiting Fellowship will also affect a larger set of researchers in Berlin and at Bergen’s research centre FAIR, notably those working on labour markets and education economics.