Relative Earnings and Giving in a Real-Effort Experiment

This paper investigates the relationship between relative earnings and giving in a twostage, real-effort experiment. In the first stage, four players compete in a tournament that determines their earnings. In the second stage, they decide whether they wish to transfer part of their earnings to one or more of their group members. Our main finding is that those who are ranked first are significantly less likely to give than those who are ranked second. This non-monotonic relationship between earnings and giving behavior disappears if individual earnings are randomly determined or if individuals learn about the second (transfer) stage after they earn their income. These results suggest that the non-monotonic relationship detected may be driven by differences in individuals’ expectations about others’ behavior in the second stage, which are correlated with their own willingness to give.