The psychology of markets vs. hierarchies: The procedural fairness of alternative allocation procedures for benefits and burdens

Abstract This paper reports two studies examining the influence of social context on judgments about the fairness and desirability of two allocation mechanisms — markets and hierarchies. Two allocation contexts are compared: distributing benefits and burdens. The results show that people prefer to allocate burdens through markets and benefits through hierarchies. In both cases desirability is linked to procedural fairness, suggesting that people always prefer to use the fairer procedure for allocation, but view different procedures as fairer in these different contexts. Procedural fairness judgments were found to be linked to respondents' judgments about the impact of using different procedures to make allocations in each context, with people in each case preferring the procedure that they believe will have the most positive impact upon group cohesion. These findings suggest that what is construed as a fair procedure in one social context is not the same as what is construed as a fair procedure in another social context.