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A Bayesian approach of the consequence of failure on inequality acceptance: Experimental evidence

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  • Emillien Prost
  • Gaye‐Del Lo

Abstract

In this paper, we design a two‐stage experiment and a tractable model. The first stage is a tournament, and the second stage involves a hierarchical relationship where the loser of the tournament must declare what they think is an acceptable earnings distribution to have an incentive to work for the winner. We use a Becker–Degroot–Marschak (BDM) procedure to elicit the acceptable earnings distribution. We show that failure in the tournament could decrease the willingness to accept wage inequality and that this behavior relies on Bayesian updating. We identify a “fresh start” effect: When the asset required to win the tournament is not the same as the asset that the loser uses to produce after failure, inequality acceptance is higher.

Suggested Citation

  • Emillien Prost & Gaye‐Del Lo, 2023. "A Bayesian approach of the consequence of failure on inequality acceptance: Experimental evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(8), pages 4707-4721, December.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:8:p:4707-4721
    DOI: 10.1002/mde.3952
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