Inequality and Fairness with Heterogeneous Endowments: A Network Cooperation Experiment

Abstract: People differ in intelligence, cognitive ability, personality traits, motivation, and similar valued and, to a large degree, inherited characteristics that determine success and achievements. When does individual heterogeneity turn into a fair distribution of rewards and outcomes? While most prior social research has investigated subjective individual perceptions of fairness and inequality, we here shift our focus to objectively quantifying the fairness of emergent group outcomes. We first investigate the functional relationship between individual endowments and outcomes to distinguish between fairness concepts such as meritocracy, equality of opportunity, equality of outcomes, and Rawl’s theory of justice. We then use a network cooperation experiment to study how information about individual endowments and outcomes affects social interaction groups in relation to these fairness patterns. We find that while visible outcomes lessen inequality by decreasing the dispersion of outcomes across the group, endowments need to be visible for better equality of opportunity for the most disadvantaged.