Racial differences in inequality aversion: Evidence from real world respondents in the ultimatum game

The distinct historical and cultural experiences of American blacks and whites may influence whether members of these groups perceive a particular exchange as fair. We investigate racial differences in fairness standards using preferences for equal treatment in the ultimatum game. We focus on whether responders choose to accept a proposed division of a monetary amount or to block it. We use a sample of over 1600 blacks and whites drawn from the universe of registered voters in three states merged with information on neighborhood income and racial composition. We experimentally vary proposed divisions as well as the implied race of the proposer. We find that acceptance in both groups is strongly influenced by the level of inequity in a proposed division, but blacks are also influenced by the offer amount while whites are not. This is driven by the lowest income group in our sample, which represents the 10th percentile of the black income distribution. We are able to reject that blacks and whites in this group share a common, simple utility function. We also find that blacks are more sensitive to unfair proposals from other blacks.