Do Economic Inequalities Affect Long-Run Cooperation & Prosperity?

Produced by: 
Available from: 
April 2019
Paper author(s): 
Gabriele Camera
Cary Deck
David Porter
Topic: 
Poverty - Inequality - Aid Effectiveness
Year: 
2019

We explore if fairness and inequality motivations affect cooperation in indefinitely repeated games. Each round, we randomly divided experimental participants into donor-recipient pairs. Donors could make a gift to recipients, and ex-ante earnings are highest when all donors give. Roles were randomly reassigned every period, which induced inequality in ex-post earnings. Theoretically, income-maximizing players do not have to condition on this inequality because it is payoff-irrelevant. Empirically, payoff-irrelevant inequality affected participants’ ability to coordinate on efficient play: donors conditioned gifts on their own past roles and, with inequalities made visible, discriminated against those who were better off.

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