JENA ECONOMIC RESEARCH PAPERS # 2010 – 018 Equity versus Efficiency ?

In two-person generosity games the proposer's agreement payo is exogenously given whereas that of the responder is endogenously determined by the proposer's choice of the pie size. Earlier results for two-person generosity games show that participants seem to care more for e ciency than for equity. In three-person generosity games equal agreement payo s for two of the players are either exogenously excluded or imposed. We predict that the latter crowds out or at least weakens e ciency seeking. Our treatments rely on a 2x3 factorial design di ering in whether the responder or the third (dummy) player is the residual claimant and whether the proposer's agreement payo is larger, equal, or smaller than the other exogenously given agreement payo .