Moral Costs and Rational Choice: Theory and Experimental Evidence
The literature exploring other regarding behavior sheds important light on interesting social phenomena, yet less attention has been given to how the received results speak to foundational assumptions within economics. Our study synthesizes the empirical evidence, showing that recent work challenges convex preference theory but is largely consistent with rational choice theory. Guided by this understanding, we design a new, more demanding test of a central tenet of economics—the contraction axiom—within a sharing framework. Making use of more than 325 dictators participating in a series of allocation games, we show that sharing choices violate the contraction axiom. We advance a new theory that augments standard models with moral reference points to explain our experimental data. Our theory also organizes the broader sharing patterns in the received literature.
We thank the John Templeton Foundation for funding this research under the Science of Philanthropy Initiative. We thank Justin Holz, Andrew Christensen, and Kristin Troutman for excellent research assistance. We thank participants at the Economic Science Association conferences in Sydney and Dallas, American Economic Association conference (especially our discussant Bill Harbaugh), seminar and workshop participants at the University of Pittsburgh, Duke University, Georgia State University, University of Technology Sydney, Queens University of Technology, Monash University and Virginia Commonwealth University for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.