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How not to extend models of inequality aversion

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  • Engelmann, Dirk

Abstract

Several authors have made attempts to improve the explanatory power of models of inequality aversion, in particular the one by Fehr and Schmidt (1999), by adding concerns for total surplus or efficiency. In this note, I point out that these attempts are misguided because they are equivalent to a much simpler change, not requiring an additional parameter, unless we simultaneously consider games with different numbers of players. In the latter case, however, such an approach yields implausible predictions.

Suggested Citation

  • Engelmann, Dirk, 2012. "How not to extend models of inequality aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 599-605.
  • Handle: RePEc:eee:jeborg:v:81:y:2012:i:2:p:599-605
    DOI: 10.1016/j.jebo.2011.08.007
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    References listed on IDEAS

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    1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
    2. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    3. James C. Cox & Daniel Friedman & Vjollca Sadiraj, 2008. "Revealed Altruism," Econometrica, Econometric Society, vol. 76(1), pages 31-69, January.
    4. Ellison Brenna & Lusk Jayson L & Briggeman Brian, 2010. "Other-Regarding Behavior and Taxpayer Preferences for Farm Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-29, October.
    5. Blanco, Mariana & Engelmann, Dirk & Normann, Hans Theo, 2011. "A within-subject analysis of other-regarding preferences," Games and Economic Behavior, Elsevier, vol. 72(2), pages 321-338, June.
    6. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    7. Kritikos, Alexander & Bolle, Friedel, 2001. "Distributional concerns: equity- or efficiency-oriented?," Economics Letters, Elsevier, vol. 73(3), pages 333-338, December.
    8. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
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    Citations

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    Cited by:

    1. Brice Corgnet & Antonio M. Espín & Roberto Hernán-González, 2015. "The cognitive basis of social behavior: cognitive reflection overrides antisocial but not always prosocial motives," Working Papers 15-04, Chapman University, Economic Science Institute.
    2. Alexia Gaudeul, 2013. "Social preferences under uncertainty," Jena Economic Research Papers 2013-024, Friedrich-Schiller-University Jena.
    3. Fudenberg, Drew & Levine, David K., 2012. "Fairness, risk preferences and independence: Impossibility theorems," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 606-612.
    4. Dreber, Anna & Fudenberg, Drew & Rand, David G., 2014. "Who cooperates in repeated games: The role of altruism, inequity aversion, and demographics," Journal of Economic Behavior & Organization, Elsevier, vol. 98(C), pages 41-55.
    5. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2015. "Privacy concerns, voluntary disclosure of information, and unraveling: An experiment," European Economic Review, Elsevier, vol. 75(C), pages 43-59.
    6. Kamas, Linda & Preston, Anne, 2015. "Can social preferences explain gender differences in economic behavior?," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 525-539.
    7. Pelligra, Vittorio & Stanca, Luca, 2013. "To give or not to give? Equity, efficiency and altruistic behavior in an artefactual field experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 46(C), pages 1-9.
    8. Yang, Yang & Onderstal, Sander & Schram, Arthur, 2016. "Inequity aversion revisited," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 1-16.
    9. Valerio Capraro & Brice Corgnet & Antonio M. Espin & Roberto Hernán-Gonzalez, 2017. "Deliberation favours social efficiency by making people disregard their relative shares: Evidence from US and India," Post-Print halshs-01439121, HAL.
    10. Silvester Van Koten & Andreas Ortmann & Vitezslav Babicky, 2013. "Fairness in Risky Environments: Theory and Evidence," Games, MDPI, Open Access Journal, vol. 4(2), pages 1-35, May.
    11. Bland, James & Nikiforakis, Nikos, 2015. "Coordination with third-party externalities," European Economic Review, Elsevier, vol. 80(C), pages 1-15.
    12. Kohler, Stefan, 2013. "Inequality aversion causes equal or unequal division in alternating-offer bargaining," MPRA Paper 40764, University Library of Munich, Germany.

    More about this item

    Keywords

    Inequality aversion; Efficiency; Social preferences;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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