Fairness and sharing in innovation games: a laboratory investigation

This paper studies whether psychological considerations can prevent agents from adopting potentially Pareto improving innovations. In the innovation game without the sharing option, A chooses whether to introduce an innovation that increases A’s payoff, but reduces B’s payoff, relative to “status quo” payoffs. B then decides whether to accept or reject the innovation. The unique subgame perfect equilibrium based on pecuniary payoffs (innovate, accept) is observed less than one-half of the time. When A can invest resources to share his innovation gains with B, the availability of sharing increases the innovation rate in one of the two payoff treatments. © 2002 Elsevier Science

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