Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game

Abstract

Abstract Two recent models incorporating fairness considerations into the economics literature based on agents’ concerns about the distribution of payoffs between themselves and others (Fehr-Schmidt, 1999, Quarterly Journal of Economics. 114 (3), 769-816; Bolton-Ockenfels, 2000, American Economic Review. 90,166-193) are investigated using a new three-person ultimatum game: One person allocates a sum of money to two others, one of which is randomly chosen to accept or reject the offer. Rejection gives both the responder and the proposer zero income and a positive consolation prize for the non-responder. The data show essentially no reductions in rejection rates, holding offers constant, with and without consolation prizes, contrary to both models’ predictions.

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