Given the importance of fairness considerations on economic outcomes, many attempts have been made to understand the nature of fairness.There have been two major attempts for incorporating preferences for fairness into economic. The first views fairness as a question of intentions. In Rabin (1993) people have preferences to reward good intentions and punish bad intentions. The second view bases fairness considerations solely on the final payoff distributions, without considering the responsibility of different players for the outcome. Bolton and Ockenfels (2000) and Fehr and Schmidt (1999) provide successful theories which account for a wide range of empirical findings, including those which have previously been viewed as evidence for intentions/reciprocity, such as the gift exchange experiments (Fehr, Kirchsteiger and Riedl , 1993).

In this paper we present a simple three player extended ultimatum game where subjects face the same payoff distributions under two different conditions. In the "Active" condition, the Proposer divides $10 between herself and the Responder. If the Responder accepts, the division is implemented, if he rejects, the Proposer and the Responder get $0, but a third player gets $10 (or in another treatment $5, or $0.) In the "Passive" condition the Proposer suggests a division for the Responder and the third party, and in this case if the Responder rejects, the Proposer gets $10 (or $5 or $0). Note that a rejection of a 9:1 proposal in the "Active" condition, means that a third party gets $10, whereas such a rejection in the "Passive" condition means that the Proposer, who is responsible for this "unfair" division in the first place, gets the $10. However in both cases, the Responder decides whether to prefer a payoff distribution of (9,1,0) to (0,0,10). We observed different behavior depending on the identity of the recipients, i.e., which of the players will be rewarded and which one punished. Thus the "cause" of the distribution affects acceptance rates. In the "Active" condition the Proposer rejects unfair divisions and there seems no effect on whether the third party gets $5 or $10 in case of rejection, and in the "Passive" condition the Responder accepts unfair divisions and the exact amount the Proposer gets in case of rejection seems to have a small effect. These results indicate that fairness considerations are not solely based on the final distributions of outcomes.

Co-author Yoella Bereby-Meyer