State dependence in sequential equity judgements

Abstract

We report the results from a questionnaire-type experiment designed to elicit whether individuals decide in accordance with the equity axiom constituent for Rawls's second principle. The experiment is sequential in nature. Hence it generates panel data. We use recently developed panel data methods for studying the role that state dependence and unobservable individual-specific effects play for the observed equity judgements. The results indicate that a dominant share of our probants initially adhere to Hammond's equity axiom, but that many of these leave the Rawlsian position at later stages of the experiment. Although state dependence plays a significant role it cannot alone explain the observed decision behavior. Individual-specific effects are also important. © 2010 Springer-Verlag.