The authors thank Vai-Lam Mui, Hans Normann, participants of the Econometric Society North American Summer Meeting (Pittsburgh) and the Econometric Society European Meeting (Milan), an anonymous referee and two editors for helpful comments, Steffen Huck for providing the data, Philip Ng for research assistance and Robert Canwell for editorial help. Financial support from the Hong Kong Institute of Economics and Business Strategy at the University of Hong Kong is gratefully acknowledged.
Estimating a Parsimonious Model of Inequality Aversion in Stackelberg Duopoly Experiments*
Article first published online: 14 JUN 2010
© Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2010
Oxford Bulletin of Economics and Statistics
Volume 72, Issue 5, pages 669–686, October 2010
How to Cite
Lau, . S.-H. P. and Leung, F. (2010), Estimating a Parsimonious Model of Inequality Aversion in Stackelberg Duopoly Experiments. Oxford Bulletin of Economics and Statistics, 72: 669–686. doi: 10.1111/j.1468-0084.2010.00592.x
- Issue published online: 24 AUG 2010
- Article first published online: 14 JUN 2010
- Final Manuscript Received: December 2009
In the Stackelberg duopoly experiments in Huck et al. (2001), nearly half of the followers’ behaviours are inconsistent with conventional prediction. We use a test in which the conventional self-interested model is nested as a special case of an inequality aversion model. Maximum likelihood methods applied to the Huck et al. (2001) data set reject the self-interested model. We find that almost 40% of the players have disadvantageous inequality aversion that is statistically different from zero and economically significant, but advantageous inequality aversion is relatively unimportant. These estimates provide support for a more parsimonious model with no advantageous inequality aversion.