procedural unfair wage differentials and their effects on unethical behavior in this paper we investigate how payment procedures that are deemed unfair can spur unethical behavior towards innocent coworkers in a real effort experiment in our discrimination treatment a highly unfair payment procedure with wage differentials half the workforce is randomly selected and paid by relative performance whereas the remaining receives no payment a joy of destruction game measures unethical behavior subsequently non earners in discrimination destroy significantly more than in the non discriminatory control treatments in discrimination unethical behavior is generally high for all non earners independent of individual inequality aversion and relative performance beliefs in the control treatments inequality aversion is the main driver of destructive behavior

loss aversion and learning to bid bidding challenges learning theories even with the same bid experiences vary stochastically the same choice can result in either a gain or a loss in such an environment the question arises of how the nearly universally documented phenomenon of loss aversion affects the adaptive dynamics we analyse the impact of loss aversion in a simple auction using the experienced weighted attraction model of learning our experimental results suggest that individual learning dynamics are highly heterogeneous and affected by loss aversion to different degrees apart from that the experiment shows that loss aversion is not specific to rare decision making

the realization effect risk taking after realized versus paper losses abstract understanding how prior outcomes affect risk attitudes is critical for the study of choice under uncertainty a large literature documents the significant influence of prior losses on risk attitudes the findings appear contradictory some studies find greater risk taking after a loss whereas others show the opposite that people take on less risk i reconcile these seemingly inconsistent findings by distinguishing between realized versus paper losses using new and existing data i replicate prior findings and demonstrate that following a realized loss individuals avoid risk if the same loss is not realized a paper loss individuals take on greater risk jel d11 d14 d81 g11

risk rationality and time diversification the validity of the concept of time diversification is the subject of long running debate supporters of the concept argue that risk decreases as investment horizon increases detractors suggest that the concept is false on the face of it we argue that time diversification is consistent both theoretically and empirically with current conceptions of risk and rationality and we also note the implications of changes in investment horizon for stock market behavior

risk aversion in a dynamic asset allocation experiment we conduct a controlled laboratory experiment in the spirit of merton 1971 in which subjects dynamically choose their portfolio allocation between a risk free and risky asset using the optimal allocation of an investor with hyperbolic absolute risk aversion hara utility we fit the experimental choices to characterize the risk profile of our participants despite substantial heterogeneity decreasing absolute risk aversion and increasing relative risk aversion are the predominant types we also find some evidence of increased risk taking after a gain finally the session level risk attitudes show a different profile than the individual descriptions of risk attitudes

wage elasticities in working and volunteering the role of reference points in a laboratory study we experimentally test how effort responds to wages randomly assigned to accrue to individuals or to a charity in the presence of expectations based reference points or targets when individuals earn money for themselves higher wages lead to higher effort with relatively muted targeting behavior when individuals earn money for a charity higher wages instead lead to lower effort with substantial targeting behavior a reference dependent theoretical framework suggests an explanation for this differential impact when individuals place less value on earnings such as when accruing earnings for a charity instead of themselves more targeting behavior and a more sluggish response to incentives should result results from an additional experiment add support to this explanation when individuals select into earning money for a charity and thus likely place a higher value on those earnings targeting behavior is muted and no longer generates a negative effort response to higher wages data and the online appe

walras s models of the barter of stocks of commodities abstract the models are described in regard to their features that determine and express the pricing and exchange processes namely their physical characteristics participants institutions procedures rules and behavioral patterns it is shown that walras s arbitrage model is defective and walrasian arbitrage is not an equilibriating mechanism in the models that the other barter models are complete functioning systems that the numeraire does not simplify pricing in the models that the characteristics of the pricing process in the models do not involve a central or particular market authority and that they do not use or logically depend on the assumption of large numbers of traders

welfare egalitarianism in non rival environments we study equity in economies where a set of agents commonly own a technology producing a non rival good from their private contributions a social ordering function associates to each economy a complete ranking of the allocations we build social ordering functions satisfying the property that individual welfare levels exceeding a legitimate upper bound should be reduced combining that property with efficiency and robustness properties with respect to changes in the set of agents we obtain a kind of welfare egalitarianism based on a constructed numerical representation of individual preferences

social identity and governance the behavioral response to female leaders this paper uses data from artefactual field experiments and surveys conducted in 61 villages in india to examine whether men and women respond differently to women as leaders we investigate the extent to which behavior towards female leaders is influenced by experience with women in leadership positions we find evidence of significant male backlash against female leaders which can be attributed to the transgression of social norms and in particular a violation of male identity when women are assigned to positions of leadership through gender based quotas increased exposure to female leaders reduces the extent of bias

the effects of income mobility and tax persistence on income redistribution and inequality we explore the effect of income mobility and the persistence of redistributive tax policy on the level of redistribution in democratic societies an infinite horizon theoretical model is developed and the properties of the equilibrium tax rate and the degree of after tax inequality are characterized mobility and stickiness of tax policy are both negatively related to the equilibrium tax rate however neither is sufficient by itself social mobility has no effect on equilibrium taxes if tax policy is voted on in every period and tax persistence has no effect in the absence of social mobility the two forces are complementary tax persistence leads to higher levels of post tax inequality for any amount of mobility the effect of mobility on inequality is less clear cut and depends on the degree of tax persistence a laboratory experiment is conducted to test the main comparative static predictions of the theory and the results are generally supportive

pay reference points and police performance several theories suggest that pay raises below a reference point will reduce job performance final offer arbitration for police unions provides a unique opportunity to examine these theories as the police officers either receive their requested wage or receive a lower one in the months after new jersey police officers lose in arbitration arrest rates and average sentence length decline and crime reports rise relative to when they win these declines in performance are larger when the awarded wage is further from the police union s demand the findings support the idea that considerations of fairness disappointment and more generally reference points affect workplace behavior

large indivisibles an analysis with respect to price equilibrium and fairness an exchange economy is considered in which there are a finite number of individuals the same number of indivisibles and a fixed amount of a divisible good each individual consumes exactly one of the indivisibles and a certain quantity of the divisible good the existence of prices corresponding to pareto efficient allocations is proved it is also shown that this economy possesses fair allocations income fair allocations coalition fair allocations and pareto efficient egalitarian equivalent allocations in this study the effect of including large indivisibles in an exchange economy will be analyzed the analysis will be carried out with respect to the existence of price equilibrium and with respect to the existence of different forms of fairness the economy consists of a finite number of individuals the same number of indivisibles and a fixed amount of a divisible good it is assumed that each individual consumes exactly one of the indivisibles and some quantity of the divisible good we may interpret the indivisibles as being professions or houses the relationship between price equilibrium and a pareto efficient allocation is well known and proved in a number of cases under different assumptions about preferences and commodities for a standard economy see e g debreu 5 in case of nonconvexities which may also describe a certain type of indivisibility we may have an exact relationship in economies with a continuum of individuals see e g hildenbrand 11 but otherwise an approximate relationship obtains the degree of approximation depends on the degree of nonconvexities in preferences and not on the number of individuals see e g arrow and hahn 1 we will prove the existence of prices characterizing a pareto efficient allocation in a case where the indivisibles play an essential role and where approximate results would be too approximate the indivisibles may be considered large for the individual compared to his total consumption the theory of fairness has developed considerably during the seventies different kinds of concepts of fairness have been introduced and analyzed see daniel 41 foley 81 pazner and schmeidler 121 and schmeidler and vind 141 among others normally these authors have considered models with divisible goods or an infinite number of individuals for exchange economies the existence of fair allocations an envy free and pareto efficient allocation has been proved in

the incentive effects of inequality an experimental investigation author affiliation hyejin ku hku fsu edutimothy c salmon tsalmon smu edu acknowledgment the authors would like to thank the national science foundation for research support in funding these experiments we also thank participants at the cornell edinburgh conference on relativity inequality and public policy the international esa meeting in washington d c the european esa meeting in innsbruck and the conference on aspirations and poverty at the university of warwick as well participants in seminars at virginia commonwealth university carnegie mellon university helmut schmidt university and goethe university in frankfurt 1 introductioneconomists have established many ways in which initial inequality may influence the paths of economic development in a series of historical studies engerman and sokoloff 1997 2002 2005 argue that the initial differences in factor endowments between north and south america contributed to the emergence of different institutions between the two regions which in turn led to the divergence in the rates of growth persson and tabellini 1994 examine more recent data and argue that there is a significant and large negative relation between inequality and growth while banerjee and duflo 2003 argue that the relationship between growth and inequality is an inverted u shaped function understanding the relationship between inequality and economic growth is important in the design of a broad range of economic development policies and there is a substantial literature that investigates the mechanics behind the linkages between growth and inequality loury 1981 galor and zeira 1993 banerjee and newman 1993 durlauf 1996 benabou 1996 2000 and mookherjee and ray 2003 are well established studies in the literature and the typical nature of the proposed linkage between inequality and either growth or persistent inequality in these papers is differential endowment or investment opportunities of agents often in the form of human capital and occupational choice we propose a new possible linkage between inequality and growth which may also be useful in explaining the persistence of inequality the linkage we propose is the incentive effects of inequality from a behavioral perspective specifically we argue that individuals may respond not just to the absolute return on their effort but also to their return relative to that of others if present this effect can lead to inequality having a direct impact on the decisions of individuals unlike in the existing literature wherein it only alters aggregate societal outcomes to explain the nature of the effect we investigate suppose that as a result of identity marks such as gender caste or race an individual receives lesser rewards than others in society for the same amount of effort provided then one can envision this individual eventually becoming discouraged by repeatedly facing disadvantageous inequality and this could result in the individual exhibiting a variety of responses ranging from decreased on the job work effort to decreased human capital acquisition and decreased contributions to public goods if such a behavioral response to inequality exists then there are a number of important consequences associated with it first this effect ceteris paribus would generate a negative relationship between inequality and economic growth there are a number of forces at play in an aggregate economy so this is not to claim that the overall relationship between inequality and growth must be negative if this effect exists but the partial effect of inequality on growth due to this behavioral effect would be negative second separately or in addition to the theoretical models cited above this effect could generate persistent inequality from initial idiosyncratic inequality the reason is that even if the initial inequality were idiosyncratic if a worker responds by exerting less effort or investing less in human capital then this response has the potential to legitimize and then perpetuate the initially low rewards for that individual or group

fair production and allocation of an excludable nonrival good we study fairness in economies with one private good and one partially excludable nonrival good a social ordering function determines for each profile of preferences an ordering of all conceivable allocations we propose the following free lunch aversion condition if the private good contributions of two agents consuming the same quantity of the nonrival good have opposite signs reducing that gap improves social welfare this condition combined with the more standard requirements of unanimous indifference and responsiveness delivers a form of welfare egalitarianism in which an agent s welfare at an allocation is measured by the quantity of the nonrival good that consumed at no cost would leave her indifferent to the bundle she is assigned

wage transparency and performance a real effort experiment abstract without transparency about peer wages in a real effort experiment a change of wages does not affect performance with transparency however higher paid workers tend to work more accurately and lower paid workers shirk more under piece rates

social orderings for the assignment of indivisible objects in the assignment problem of indivisible objects with money we study social ordering functions which satisfy the requirement that social orderings should be independent of changes in preferences over infeasible bundles we combine this axiom with efficiency consistency and equity axioms our result is that the only social ordering function satisfying those axioms is the leximin function in money utility

fair wages and effort evidence from a field experiment the presence of workers who reciprocate higher wages with greater effort can have important consequences for firms and labor markets knowledge about the extent and determinants of reciprocal effort choices is however incomplete we investigate the role of fairness perceptions and social preferences in a field experiment in which workers were hired for a one time job we show that workers who perceive being underpaid at the base wage increase their performance if the hourly wage increases whereas those who feel adequately paid or overpaid at the base wage do not change their performance moreover we find that only the workers who display reciprocity in a choice experiment show reciprocal effort responses in the field the workers who lack reciprocity in the choice experiment do not respond to the wage increase even if they feel underpaid at the base wage our findings suggest that fairness perceptions and social preferences are key in workers performance response to wage increases in our study the wage increase affects effort mainly through the removal of perceived unfairness i e the elimination of negative reciprocity toward the firm rather than positive reciprocity these results are the first direct evidence of the fair wage effort hypothesis in the field and also help interpret previous contradictory findings in the literature

the effect of myopia and loss aversion on risk taking an experimental test myopic loss aversion is the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently two implications of myopic loss aversion are tested experimentally 1 investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often 2 if all payoffs are increased enough to eliminate losses investors will accept more risk in a task in which investors learn from experience both predictions are supported the investors who got the most frequent feedback and thus the most information took the least risk and earned the least money language en

social comparisons in oligopsony abstract a large body of evidence suggests that social comparisons matter for workers valuation of the wage they receive the consequences of social comparisons in imperfectly competitive labor markets are less well understood we analyze an oligopsonistic model of the labor market where workers derive dis utility from comparing their own wage with wages paid at other firms as social comparisons become more prevalent all workers are paid higher wages the wage distribution becomes more equal and employment shifts to high productivity firms moreover the total wage bill and output increase while aggregate profits decline overall welfare rises our theoretical results have implications for estimating the elasticity of the labor supply curve facing a firm

fairness and frictions the impact of unequal raises on quit behavior we analyze how separations responded to arbitrary differences in own and peer wages at a large us retailer regression discontinuity estimates imply large causal effects of own wages on separations and on quits in particular however this own wage response could reflect comparisons either to market wages or to peer wages estimates using peer wage discontinuities show large peer wage effects and imply the own wage separation response mostly reflects peer comparisons the peer effect is driven by comparisons with higher paid peers suggesting concerns about fairness separations appear fairly insensitive when raises are similar across peers suggesting search frictions and monopsony are relevant in this low wage sector

an experiment on risk taking and evaluation periods does the period over which individuals evaluate outcomes influence their investment in risky assets results from this study show that the more frequently returns are evaluated the more risk averse investors will be the results are in line with the behavioral hypothesis of myopic loss aversion which assumes that people are myopic in evaluating outcomes over time and are more sensitive to losses than to gains the results have relevance for the equity premium puzzle and also for the marketing strategies of fund managers

in search of workers real effort reciprocity a field and a laboratory experiment we present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages work effort neither reacts to an increase of the own wage nor to a positive or negative peer comparison this result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort in an additional real effort laboratory experiment we show that explicit cost and surplus information that enables an exact calculation of an employer s surplus from the work contract is a crucial prerequisite for a positive wage effort relation this demonstrates that an employee s reciprocity requires a clear assessment of the surplus at stake jel c91 c92 j41

fair income tax fairness is a key concept in redistribution issues in this paper we study how particular requirements of fairness can shed light on the design of the optimal income tax schedule we consider a population of heterogeneous individuals or households who differ in two respects first they have unequal skills and therefore unequal earning abilities second they differ in terms of their preferences about consumption and leisure and as a consequence typically make different labour time choices both kinds of differences generate income inequalities we study how to justify and compute a redistribution income tax in this context redistribution through an income tax usually entails distortions of incentives but the resulting efficiency loss has to be weighed against potential improvements in the fairness of the distribution of resources we address this efficiency equity trade off here by constructing social preferences which obey the standard pareto principle in addition to fairness conditions

team production benefits from a permanent fear of exclusion one acclaimed role of managers is to monitor workers in team production processes and discipline them through the threat of terminating them from the team alchian and demsetz 1972 we extend a standard weakest link experiment with a manager that can decide to replace some of her team members at a cost the amount of contractual commitment termination possibilities and the precision of the manager s monitoring information serve as treatment variables our results show that the fear of exclusion has a profound effect on team performance even if workers are imperfectly monitored the most flexible contract induces the highest output while the one with no firing possibilities leads to the lowest production however once the fear is eliminated for some workers because permanent workers cannot be fired after a probation phase effort levels steadily decrease

two criteria for social decisions abstract this paper studies the ethical underpinnings of two social criteria which are prominent in the literature dealing with the problem of evaluating allocations of several consumption goods in a population with heterogenous preferences the pazner schmeidler criterion pazner schmeidler egalitarian equivalent allocations a new concept of economic equity quart j econ 92 1978 671 687 and the egalitarian walras criterion fleurbaey and maniquet utilitarianism versus fairness in welfare economics in m salles j a weymark eds justice political liberalism and utilitarianism themes from harsanyi and rawls cambridge university press cambridge 1996 forthcoming are prima facie quite different but it is shown here that these criteria are related to close variants of the fairness condition that an allocation is better when every individual bundle in it dominates the average consumption in another allocation in addition the results suggest that the pazner schmeidler criterion can be viewed as the best extension of the walrasian criterion to non convex economies

on the non existence of envy free and egalitarian equivalent allocations in economies with indivisibilities abstract we consider economies with indivisible goods houses jobs and one infinitely divisible good an allocation is envy free if no agent prefers someone else s consumption to his own an allocation is egalitarian equivalent if there is a reference bundle that every agent finds indifferent to his consumption we show that in such economies there may be no allocation that is both egalitarian equivalent and envy free

mean variance analysis of supply chains under wholesale pricing and profit sharing schemes in this paper we explore the use of a wholesale pricing and profit sharing scheme wpps for coordinating supply chains under the mean variance mv decision framework we first analytically establish the necessary and sufficient conditions for coordinating the centralized supply chain by wpss we then show that there exists a unique equilibrium of the stackelberg game with wpps in the decentralized case after that we discuss the information asymmetric case in which the retailer can be benefited by pretending to be more risk averse finally we propose a new measure for the manufacturer to prevent this cheating from happening insights are generated

risk taking for oneself and others a structural model approach economic theory makes no predictions about social factors affecting decisions under risk we examine situations in which a decision maker decides for herself and another person under conditions of payoff equality and compare them to individual decisions by estimating a structural model we find that responsibility leaves utility curvature unaffected but accentuates the subjective distortion of very small and very large probabilities for both gains and losses we also find that responsibility reduces loss aversion but that these results only obtain under some specific definitions of the latter these results serve to generalize and reconcile some of the still largely contradictory findings in the literature they also have implications for financial agency which we discuss

perfect competition or the core abstract the general concepts final settlement and competition defined by edgeworth 1881 are redefined in a modern setting the special application exchange equilibrium is compared to the later concept the core the history of exchange equilibrium is surveyed

if wages fell during a recession abstract many economies exhibit downward wage rigidity surveys of managers indicate that employers hold wages rigid because they believe morale will suffer after a wage cut otherwise there is little evidence for how employers beliefs contribute to wage rigidity and whether those beliefs are accurate using an experiment we demonstrate that effort falls after workers experience a wage cut despite this partial confirmation of the bewley 1999 morale theory half of the employers in our experiment cut wages and lose money as a result under nominal inflation real wage cuts do not have a significant effect on effort

relative pay and labor supply we examine the impact of relative wages on labor supply in a laboratory experiment we test the hypothesis that ceteris paribus making a given wage high low relative to other wage levels will lead to an increase decrease in labor supply we find that labor supply does respond significantly to relative pay and in the expected direction however when a strong enough reason for the relative low pay is given this difference disappears

investment flexibility and the acceptance of risk abstract the hypothesis examined in this paper is that the greater the investor s flexibility the easier it is for him to change his portfolio depending on his results the more willing he will be to accept risks when the investor has no control on the size of the risky investment but can choose between one risky and one riskless asset this conjecture is shown to be correct however if there is more than one risky asset each period counterexamples demonstrate that flexibility rarely ensures greater risk taking for the standard portfolio problem in which investors are free to determine the size of their investment in a risky asset flexibility always raises the demand for the risky asset if constant relative risk aversion is less than unity but counterexamples can always be found when the constant relative risk aversion is larger than unity journal of economic literatureclassification numbers g11 d81 d84

social comparison and performance experimental evidence on the fair wage effort hypothesis we investigate the impact of wage comparisons for worker productivity we present three studies which all use three person gift exchange experiments consistent with akerlof and yellen s 1990 fair wage effort hypothesis we find that disadvantageous wage discrimination leads to lower efforts while advantageous wage discrimination does not increase efforts on average two studies allow us to measure wage comparison effects at the individual level we observe strongly heterogeneous wage comparison effects we also find that reactions to wage discrimination can be attributed to the underlying intentions of discrimination rather than to payoff consequences

no envy and consistency in economies with indivisible goods we consider the problem of fair allocation in economies with indivisible goods our main objective is to identify appealing subsolutions of the no envy solution we formulate desirable properties of solutions and look for solutions satisfying them given an allocation chosen by a solution for some economy and given a subgroup of the agents consider the problem of fairly distributing among its members the resources that this group has collectively received the solution is consistent if it recommends that the same bundle be attributed to each of these agents as initially we show that there is no proper subsolution of the no envy solution that satisfies consistency however many subsolutions satisfy bilateral consistency or the converse of consistency but again there is no proper subsolution satisfying these two properties together

who compares to whom the anatomy of income comparisons in europe this article provides unprecedented direct evidence from large scale survey data on both the intensity how much and direction to whom of income comparisons income comparisons are considered to be at least somewhat important by three quarters of europeans they are associated with both lower levels of subjective well being and a greater demand for income redistribution the rich compare less and are happier than average when they do which latter is consistent with relative income theory with respect to the direction of comparisons colleagues are the most frequently cited reference group those who compare to colleagues are happier than those who compare to other benchmarks

how price path characteristics shape investment behavior abstract price paths are often the only graphical representation of financial products investors receive before making an investment decision we argue that price paths serve as graphical frames that influence the perceived attractiveness of an asset by highlighting specific asset characteristics in a controlled lab experiment we find that price paths have an impact on investment decisions in a regression we test a simple model relating the perception of price path shapes to several heuristics these heuristics are focusing on more recent outcomes deriving implicit reference prices from focal prices focusing on losses and estimating risk from the amplitude of the path we conclude that investment decisions are systematically biased due to the shape of an asset s price path

coherent arbitrariness stable demand curves without stable preferences economic theories of valuation generally assume that prices of commodities and assets are derived from underlying fundamental values for example in finance theory asset prices are believed to reflect the market estimate of the discounted present value of the asset s payoff stream in labor theory the supply of labor is established by the tradeoff between the desire for consumption and the displeasure of work finally and most importantly for this chapter consumer microeconomics assumes that the demand curves for consumer products chocolates cds movies vacations drugs and so forth can be ultimately traced to the valuation of pleasures that consumers anticipate receiving from these products because it is difficult as a rule to measure fundamental values directly empirical tests of economic theory typically examine whether the effects of changes in circumstances on valuations are consistent with theoretical prediction for example whether labor supply responds appropriately to a change in the wage rate whether compensated demand curves for commodities are downward sloping or whether stock prices respond in the predicted way to share repurchases however such comparative static relationships are a necessary but not sufficient condition for fundamental valuation e g summers 1986 becker 1962 was perhaps the first to make this point explicitly when he observed that consumers choosing commodity bundles randomly from their budget set would nevertheless produce downward sloping demand curves

labor supply of new york city cabdrivers one day at a time life cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages because such changes have virtually no effect on life cycle wealth previous attempts to test this hypothesis empirically with time series data have not been supportive estimated elasticities are typically negative or nonsignificant such analyses however are vulnerable to measurement error and other estimation problems we use data on daily observations of wages and hours for new york city cab drivers to estimate the supply response to transitory fluctuations in wages cab drivers decide daily how many hours to supply and face wages that are positively correlated within days but largely uncorrelated between days using these data our central finding is that wage elasticities are persistently negative from 5 to 1 in three different samples even after correcting for measurement error using instrumental variables these negative wage elasticities challenge the notion that cab drivers trade off labor and leisure at different points in time and question the empirical adequacy of life cycle formulations of labor supply

performance in competitive environments gender differences even though the provision of equal opportunities for men and women has been a priority in many countries large gender differences prevail in competitive high ranking positions suggested explanations include discrimination and differences in preferences and human capital in this paper we present experimental evidence in support of an additional factor women may be less effective than men in competitive environments even if they are able to perform similarly in non competitive environments in a laboratory experiment we observe as we increase the competitiveness of the environment a significant increase in performance for men but not for women this results in a significant gender gap in performance in tournaments while there is no gap when participants are paid according to piece rate this effect is stronger when women have to compete against men than in single sex competitive environments this suggests that women may be able to perform in competitive environments per se

walras s theories of tatonnement it is shown that leon walras developed two separate theories of tatonnement one is a disequilibrium production model the other is a pledges model in which transactions and production occur only at the equilibrium set of prices these models are explained and the manner in which they appear in the vari ous editions of walras s elements is used to account for the developm ent of conflicting interpretations of his writings on tatonnement it is shown that the disequilibrium production model is more representa tive of walras s work than the pledges model and that the latter is i ncompatible with the theories of particular aspects of economic behav ior on which the elements depends for its verisimilitude and explanat ory power copyright 1987 by university of chicago press

fair allocation of indivisible goods and criteria of justice a set of n objects and an amount m of money is to be distributed among m people example the objects are tasks and the money is compensation from a fixed budget an elementary argument via constrained optimization shows that for m sufficiently large the set of efficient envy free allocations is nonempty and has a nice structure in particular various criteria of justice lead to unique best fair allocations that are well behaved with respect to changes of m this is in sharp contrast to the usual fair division theory with divisible goods

car mechanics in the lab investigating the behavior of real experts on experimental markets for credence goods credence goods such as car repairs or medical services are characterized by severe informational asymmetries between sellers and consumers leading to fraud in the form of provision of insufficient service undertreatment provision of unnecessary service overtreatment and charging too much for a given service overcharging recent experimental research involving a standard student subject pool has examined the influence of informational and market conditions on the type and level of fraud we investigate whether professional car mechanics as real sellers of credence goods react in the same way to changes in informational and institutional constraints while we find qualitatively similar effects in the fraud dimensions of undertreatment and overcharging for both subject pools car mechanics are significantly more prone to supplying unnecessary services in all conditions which could be a result of decision heuristics they learned in their professional training