Luck-based versus merit-based income shifts fairness perceptions and promotes cooperation in a public goods game

Abstract We experimentally study the impact of merit- and luck-based inequalities on cooperative behaviour and fairness perceptions. Using a sample from non-student populations (N = 542), we examine behaviour in one-shot public good games (PGG) in treatments where individuals’ income is randomly allocated (‘Luck’) or performance dependent (‘Merit’). In line with our theoretical framework, we find that groups with merit-based inequality contribute less to the public goods than groups with luck-based inequality. To explore the underlying mechanism, we elicit fairness judgments from the perspective of a neutral, uninvolved arbitrator. Individuals in groups with merit-based inequality perceive it fairer to cooperate less, and these fairness perceptions account for their lower contributions. The effect on cooperation and fairness perceptions is driven primarily by rich individuals in merit-based societies. Our findings provide causal evidence that the source of inequality shapes cooperation through perceived fairness, with important implications for policy making targeted at promoting public good contributions.