Promoting Competition or Helping the Less Endowed? Distributional Preferences and Collective Institutional Choices under Intragroup Inequality

Unequally distributed resources are ubiquitous. The decision of whether to promote competition or equality is often debated in societies and organizations. With heterogeneous endowments, we let subjects collectively choose between a public good that most benefits the less endowed and a lottery contest in which only one individual in a group receives a prize. Unlike standard theoretical predictions, the majority of subjects, including a substantial number of subjects who believe that their expected payoffs are better in the contest, vote for the public good. Our data suggest that people’s collective institutional choices may be driven by inequality-averse concerns. It also suggests that the collective decision to select the option for the public good depends on voting rules.