The Rich and the Poor Dilemma : Second-party Endowment Effect in the Dictator Game

In the Dictator game, the standard tool for inquiring into altruistic behaviour in behavioural experiments, the roles of Dictator or Recipient are often randomly assigned. In such cases, the former starts the game with a positive endowment while the latter begins with zero. Altruistic behaviour is often aimed toward people from nearby social circles who have suffered a loss due to some extraordinary event (such as a car accident, sudden disease, or job loss). These kinds of external shocks can result in a higher degree of empathy towards victims than towards the needy who have never had anything at all.In this study we examine the endowment effect (when the willingness to pay to get something is lower than the willingness to keep something one already owns) towards a second party. Specifically, we check how the observation of loss in the initial amount owned by a Recipient induces altruistic behaviour in a Dictator. In addition, we compare the inequality vs. equality of the endowments of the two parties and how it may impact the endowment effect