Production from One,Distribution to All? Examining Effort-Based Distributional Norms in a Controlled Lab Study

Abstract

In the standard Ultimatum Game, a proposer is provided with a sum of money by the experimenter. The proposer makes a take-it-or-leave-it offer to a responder that, if accepted, is divided in the proposed manner. If the responder rejects the offer, both receive nothing. We modify this framework by providing the proposer with an endowment created by work performed by the responder prior to participating in an Ultimatum Game. We find that average offers by proposers increase. Responders, however, are less likely to reject a given size offer when compared with the standard, experimenter-provided endowment. We take this as evidence that the mode of production affects distributional outcomes, a result that is at odds with conventional economic approaches, but consistent with arguments expressed by Marx and others.

JEL Classification: C91, D30, D63