Efficiency and Fairness During the Great Recession


The most recent financial crisis presented policymakers with some non-trivial trade-offs. Policymakers had to decide between the efficiency, as not bailing out may lead to the economic collapse, and fairness, as bailing out redistributes the money from the prudent economic agents to the imprudent ones. In this paper, we design a laboratory experiment, which presents subjects with the similar dilemma and investigates the relative strength of the competing motives behind their decisions, as well as the role of information in affecting this strength.