We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish actors become inferior when some agents are concerned about fairness. Conversely, contracts that...

In recent years a large number of experimental studies have documented the existence of strong reciprocity among humans. Strong reciprocity means that people willingly repay gifts and punish the violation of cooperation and fairness norms even in anonymous one-shot encounters with genetically...

In this paper we show that a simple model of fairness preferences explains major experimental regularities of common pool resource (CPR) experiments. The evidence indicates that in standard CPR games without communication and without sanctioning possibilities inefficient excess appropriation is...

Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent payoffs in nominal terms, choices converge to the Pareto inefficient equilibrium; however, if we lift the veil of money by...

Increasing inequality and associated egalitarian sentiments have again put redistribution on the political agenda. Other-regarding preferences may also affect support for redistribution, but knowledge about their distribution in the broader population and how they are associated with political...

We review the vast literature on social preferences by assessing what is known about their fundamental properties, their distribution in the broader population, and their consequences for important economic and political behaviors. We provide, in particular, an overview of the empirically...

Most economic models are based on the self-interest hypthesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have gathered overwhelming evidence that systematically refutes the self-interest hypothesis and suggests...