Reference Points, Perceived Procedures, and Fairness

Dorothea K Herreiner, Economics Department, Loyola Marymount University

Abstract:
This study investigates whether perceived procedures matter for the fairness of an allocation. In an experimental setting, individuals have the option to choose between allocations that yield the same payoffs to all individuals, but are achieved by assigning different objects to different individuals. In one instance that allocation can be interpreted as being based on a procedure that reduces inequality, in the other case, the allocation can be interpreted as being based on a procedure that introduces inequality. Although the actual procedure of assigning goods is the same in both cases, the reference or starting point for the two outcomes and the allocation yielding the final payoff allocation is different. The results shed light on the tradeoff between distributional and procedural justice, and on the perception of implicit procedural aspects of allocations. The saliency of reference points therefore becomes critical for the determination of the fairness of an allocation.

Keywords: Fairness, Envy Freeness, Bargaining
JEL Classification: C91, D63

Current Version: September 2008   [pdf]