Fairness in Winner-Take-All Competitions
A new article in the Review of Economics and Statistics examines how people view the extreme income inequality generated by winner-take-all competitions.
In “Fairness in Winner-Take-All Competitions” Björn Bartling, Alexander W. Cappelen, Mathias Ekström, Erik Ø. Sørensen, and Bertil Tungodden investigate fairness perceptions of winner-take-all markets using large-scale experiments with more than 7,000 participants from the general U.S. population. Spectators were asked to decide how much income to redistribute from a competition winner to a runner-up after observing their performance and earnings.
The authors find substantial acceptance of extreme earnings inequality. Across winner-take-all settings, about one-third of spectators chose not to redistribute at all, and winners were on average allocated about two-thirds of total earnings. Acceptance of inequality was significantly higher when earnings reflected performance rather than luck, even when the winner outperformed the runner-up by the smallest possible margin.
The study further shows that the size of the winning margin plays only a modest role in shaping fairness judgments. Most of the increase in inequality acceptance arises from the fact that the winner won the competition, rather than from how much better the winner performed. These patterns are robust across political, demographic, and educational groups and are replicated in a follow-up study and a laboratory experiment with Norwegian business students.
Taken together, the findings provide new evidence on how people evaluate merit and fairness in winner-take-all environments, and how these views relate to broader attitudes toward taxation, redistribution, and top-end income inequality.