Knowledge, power, and self-interest

Abstract

The paperreports the results of a laboratory experiment assessing the impact of social position (endowment) and power (structurally advantaged or disadvantaged network positions) on redistributive decisions, which involve a classical efficiency-equality trade-off. The experiment involves three decision conditions: veil of ignorance, informed dictator, and majority vote. We use a three-person social-preference model in order to derive hypotheses on the effect of knowledge and power on tax choices. Our results confirm that disclosing the social position raises the measured self-interest (Knowledge Effect) and that mandating a majority vote results in concessions, the size of which depends on the player's structural position in the network (Power Effect).