When Fair Isn't Fair: Sophisticated Time Inconsistency in Social Preferences

Abstract

How do people think about fairness in settings with uncertainty? One view holds that fairness requires equality of opportunity; another holds that it requires equality of outcomes. Relative to the resolution of uncertainty, the first view takes an ex ante perspective, while the second takes an ex post perspective. In this paper, we conduct a laboratory experiment designed to determine which perspective people adopt, and under what conditions. We find that most people view fairness from an ex ante perspective when making decisions ex ante, and from an ex post perspective when making decisions ex post. As a result, they exhibit the hallmark of time-inconsistency: after making an initial plan that is fully state-contingent, they revise it upon learning that certain states will not occur. These patterns are robust and persist even when people are aware of their proclivities. Indeed, subjects who switch from ex ante fair to ex post fair choices, and who are aware of this proclivity, generally avoid precommitments and intentionally retain the flexibility to manifest time inconsistency. We argue that these patterns are best explained by a theory of nominal fairness.