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Just luck: an experimental study of risk taking and fairness

Cappelen, Alexander W.; Konow, James; Sørensen, Erik Ø.; Tungodden, Bertil
Working paper
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URI
http://hdl.handle.net/11250/163236
Date
2010-01
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  • Discussion papers (SAM) [638]
Abstract
Choices involving risk significantly affect the distribution of income and

wealth in society, but there is probably no more contentious question of

justice than how to allocate the gains and losses that inevitably result from

risky choices. This paper reports the results from the first experiment, to

our knowledge, to study fairness views about risk-taking, where the main

aim is to examine whether people's fairness considerations mainly focus on

ex ante opportunities or ex post outcomes. The experiment was a two stage

dictator game where the distribution phase was preceded by a risk-taking

phase. Our analysis provides four main findings. First, we show that

even though many participants focus exclusively on ex ante opportunities,

the majority favors some redistribution ex post. Second, we find that,

among the participants who redistribute ex post, a substantial share make

a distinction between ex post inequalities that reflect differences in luck

and ex post inequalities that reflect differences in choices. Third, we show

that the appeal of the ex ante view is independent of how costly it is to

avoid exposure to risk. Fourth, we find that the choices of stakeholders

and impartial spectators reflect the same set of fairness considerations.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2010:4

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