Stakeholder Fairness under an Induced 'Veil of Ignorance': Findings From a Laboratory Experiment

Abstract

John Rawls introduced the �veil of ignorance' in social contract theory to bring about a common conception of justice, and hypothesized that it will enable rational individuals to choose distributive shares on basis of �maximin' principle. R. E. Freeman conceptualised stakeholder fairness using the Rawlsian �veil of ignorance'. In contrast to Rawls' theory, John Harsanyi postulated that rational individuals behind the �veil of ignorance' will choose allocation to maximise expected utility. This article investigates how subjects choose allocations behind the �veil of ignorance,' in a laboratory experiment, and interprets the findings in light of stakeholder fairness. The �veil of ignorance' was induced on randomly paired and mutually anonymous subjects, who were asked to choose allocations in a simultaneous move discrete choice Nash demand game. Both �maximin' principle and expected utility maximisation was found to be used by the subjects. Choice of allocations where no one is worse off vis-�-vis status quo was salient. This is consistent with Freeman's Principle of Governance