Other-regarding preferences and giving decision in a risky environment: experimental evidence

Abstract

We investigate whether and how an individual giving decision is affected in risky environments in which the recipient’s wealth is random. We demonstrate that, under risk neutrality, the donation of dictators with a purely ex post view of fairness should, in general, be affected by the riskiness of the recipient’s payoff, while dictators with a purely ex ante view should not be. Furthermore, we observe that some influential inequality aversion preferences functions yield opposite predictions when we consider ex post view of fairness. Hence, we report on dictator games laboratory experiments in which the recipient’s wealth is exposed to an actuarially neutral and additive background risk. Our experimental data show no statistically significant impact of the recipient’s risk exposure on dictators’ giving decisions. This result appears robust to both the experimental design (within subjects or between subjects) and the origin of the recipient’s risk exposure (chosen by the recipient or imposed on the recipient). Although we cannot sharply validate or invalidate alternative fairness theories, the whole pattern of our experimental data can be simply explained by assuming ex ante view of fairness and risk neutrality.