More Satisfaction, Less Equality: Distributive Effects of Transparent Needs in a Laboratory Experiment

Abstract

AbstractSocieties are confronted with the dilemma that need satisfaction requires transparent individual needs. We study the effect of information about others’ needs on the distribution of a joint endowment in a three-player network exchange game in a laboratory experiment. Need levels are exogenously given and either transparent (known to all three network members) or opaque (only known to the players themselves). The three players negotiate in dyads until two players agree on a distribution. We expect that the transparency of need thresholds raises need satisfaction but lowers equality. The results suggest that the members of the dyad who agree on the distribution can satisfy their own need thresholds even when information about thresholds is opaque. The effect of transparency on the remaining network member is antithetical: while transparency increases the rate of need satisfaction, it decreases the average share of allocations when needs are low. In the opaque condition, allocated shares are larger, but need satisfaction is lower. This reveals the ambivalent distributive effects of transparent need thresholds: Transparency helps those with the highest need thresholds, but it can hurt those with lower need thresholds, and it barely affects the ones with the most influence on the decision.