ABSTRACT Most real‐world negotiations involving monetary transactions require exertion of effort to procure services or commodities. Economic games that require individuals to split a pot of money (windfall) measure fairness boundaries in negotiations without accounting for effort. To examine how effort affects perceptions of fairness and allocation of resources during bargaining situations, we compared windfall with business situations in three experiments designed to examine effort from several unique perspectives: (a) implied effort manipulated by game description (all experiments); (b) perceptions of effort (Experiments 2 and 3); and (c) manipulation of indirect effort (Experiment 3). A consistent pattern emerged demonstrating that earned (through effort) and windfall monetary transactions differentially influenced perceived fairness. When effort was expended, participants placed a larger monetary value on that effort and compensated themselves and others accordingly. When no effort was involved, participants relied on egalitarian fairness norms. Copyright © 2011 John Wiley & Sons, Ltd.
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