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Social Image and the 50-50 Norm



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Forthcoming Econometrica 2009 Social Image and the 50 50 Norm A Theoretical and Experimental Analysis of Audience E ects James Andreoni University of California San Diego B Douglas Bernheim Stanford University and NBER April 6 2009 Abstract A norm of 50 50 division appears to have considerable force in a wide range of economic environments both in the real world and in the laboratory Even in settings where one party unilaterally determines the allocation of a prize the dictator game many subjects voluntarily cede exactly half to another individual The hypothesis that people care about fairness does not by itself account for key experimental patterns We consider an alternative explanation which adds the hypothesis that people like to be perceived as fair The properties of equilibria for the resulting signaling game correspond closely to laboratory observations The theory has additional testable implications the validity of which we confirm through new experiments We are indebted to the following people for helpful comments Iris Bohnet Colin Camerer Navin Kartik Antonio Rangel three anonymous referees and seminar participants at the California Institute of Technology NYU and Stanford University s SITE workshop in Psychology and Economics We acknowledge financial support from the National Science Foundation through grant numbers SES 0551296 Andreoni and SES 0452300 Bernheim 1 Introduction Equal division of monetary rewards and or costs is a widely observed behavioral norm Fiftyfifty sharing is common in the context of joint ventures among corporations e g Veuglers and Kesteloot 1996 Dasgupta and Tao 1998 and Hauswald and Hege 2003 1 share tenancy in agriculture e g De Weaver and Roumasset 2002 Agrawal 2002 and bequests to children e g Wilhelm 1996 Menchik 1980 1988 Splitting the di erence is a frequent outcome of negotiation and conventional arbitration Bloom 1986 Business partners often divide the earnings from joint projects equally friends split restaurant tabs



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