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Estimating social preferences using stated satisfaction: Novel support for inequity aversion

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  • Diaz, Lina
  • Houser, Daniel
  • Ifcher, John
  • Zarghamee, Homa

Abstract

Experimental identification of social preferences often uses a revealed-preference approach, whereby participants make choices over payment distributions for themselves and others. We introduce an alternative “stated satisfaction” approach: participants directly report their satisfaction with various payment-profiles that hold their own payment constant while varying another participant's payment. We then use our data to estimate the unrestricted parameters of the Fehr and Schmidt (1999) model to determine participants’ social preferences. While the Fehr and Schmidt parameter-assumptions make it a model of inequity aversion, alternate parameter-assumptions can reflect different social preferences. Our methodology yields support for the Fehr and Schmidt assumptions (i.e., that both disadvantageous and advantageous inequity are utility-diminishing, the former more so than the latter) at both the aggregate and individual levels. Methodologically, eliciting satisfaction can be an easy-to-implement complement to choice-based preference-measures in contexts other than social preferences that are of interest to economists.

Suggested Citation

  • Diaz, Lina & Houser, Daniel & Ifcher, John & Zarghamee, Homa, 2023. "Estimating social preferences using stated satisfaction: Novel support for inequity aversion," European Economic Review, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:eecrev:v:155:y:2023:i:c:s001429212300065x
    DOI: 10.1016/j.euroecorev.2023.104436
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    Cited by:

    1. Pang, Yudan & Wu, Hang & Wang, Xuefeng & Shi, Mengmeng, 2025. "Impact of organizational structure and in-organization resource allocation on trust and trustworthiness," Journal of Business Research, Elsevier, vol. 186(C).
    2. Ifcher, John & Zarghamee, Homa & Goff, Sandra H., 2021. "Happiness in the Lab: What Can Be Learned about Subjective Well-Being from Experiments?," GLO Discussion Paper Series 943, Global Labor Organization (GLO).

    More about this item

    Keywords

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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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