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Equity Aversion

Author

Listed:
  • Fershtman, Chaim
  • Gneezy, Uri
  • List, John
Abstract
Models of inequity aversion and fairness have dominated the behavioural economics landscape in the last decade. This study gathers data from 240 subjects exposed to variants of two of the major experimental games - dictator and trust - that are employed to provide important empirical content to these models. With a set of simple laboratory treatments that focus on a manipulation of an important feature of real markets, competition over resources, we show that extant behavioural models are unable to explain data drawn from realistic manipulations of either game. Our empirical results highlight that if placed in an environment wherein socially acceptable actions provide one person with a greater portion of the rents, people will put forth extra effort to secure those rents, to the detriment of the other player. In this manner, when one can earn more than the other player through actions deemed customary, people reveal a preference for equity aversion, not inequity aversion. We propose an alternative modelling approach that can explain these data as well as accommodate other major data patterns observed in the experimental literature.

Suggested Citation

  • Fershtman, Chaim & Gneezy, Uri & List, John, 2008. "Equity Aversion," CEPR Discussion Papers 6853, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6853
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    References listed on IDEAS

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    1. Weiss, Yoram & Fershtman, Chaim, 1998. "Social status and economic performance:: A survey," European Economic Review, Elsevier, vol. 42(3-5), pages 801-820, May.
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    Citations

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    Cited by:

    1. Houser, Daniel & Xiao, Erte, 2010. "Inequality-seeking punishment," Economics Letters, Elsevier, vol. 109(1), pages 20-23, October.
    2. Ramalingam, Abhijit, 2009. ""Endogenous" Relative Concerns: The Impact of Workers' Characteristics on Status and Pro ts in the Firm," MPRA Paper 18759, University Library of Munich, Germany.
    3. Gaute Torsvik, 2011. "Team or Individual: What Determines Workers' Preferred Bonus Schemes?," CESifo Working Paper Series 3658, CESifo.
    4. Landeo, Claudia & Spier, Kathryn, 2012. "It Takes Three to Tango: An Experimental Study of Contracts with Stipulated Damages," Working Papers 2012-14, University of Alberta, Department of Economics.

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    More about this item

    Keywords

    Equity aversion; Social preferences; Social status;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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