We explore whether individuals, when acting as social planners, respect others’ reference points. We allow subjects to redistribute unequal, unearned initial endowments between two anonymous recipients. Subjects redistribute twenty percent less when recipients know their initial endowments (and thus may have formed corresponding reference points) than when the recipients do not know their initial endowments, in which case we observe near-complete redistribution. The result holds for both within- and between-subject comparisons and is robust to a number of variants in design. The extensive margin response (redistributing zero versus any amount) drives the difference, further suggesting that respect for reference points drives the observed limited redistribution.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Redistributive preferences
- Reference dependence