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Desert and inequity aversion in teams

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  • Gill, David
  • Stone, Rebecca

Abstract

Teams are becoming increasingly important in work settings. We develop a framework to study the strategic implications of a meritocratic notion of desert under which team members care about receiving what they feel they deserve. Team members find it painful to receive less than their perceived entitlement, while receiving more may induce pleasure or pain depending on whether their preferences exhibit desert elation or desert guilt. Our notion of desert generalizes distributional concern models to situations in which effort choices affect the distribution perceived to be fair; in particular, desert nests inequity aversion over money net of effort costs as a special case. When identical teammates share team output equally, desert guilt generates a continuum of symmetric equilibria. Equilibrium effort can lie above or below the level in the absence of desert, so desert guilt generates behavior consistent with both positive and negative reciprocity and may underpin social norms of cooperation.

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  • Gill, David & Stone, Rebecca, 2015. "Desert and inequity aversion in teams," Journal of Public Economics, Elsevier, vol. 123(C), pages 42-54.
  • Handle: RePEc:eee:pubeco:v:123:y:2015:i:c:p:42-54
    DOI: 10.1016/j.jpubeco.2014.12.001
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    Cited by:

    1. Haoran He & Marie Claire Villeval, 2014. "Are teams less inequality averse than individuals?," Post-Print halshs-01077253, HAL.
    2. Goto, Jun & Sawada, Yasuyuki & Aida, Takeshi & Aoyagi, Keitaro, 2015. "Incentives and Social Preferences: Experimental Evidence from a Seemingly Inefficienct Traditional Labor Contract," 2015 Conference, August 9-14, 2015, Milan, Italy 211687, International Association of Agricultural Economists.
    3. Kohei Daido & Takeshi Murooka, 2013. "Loss Aversion, Stochastic Compensation, and Team Incentives," Discussion Paper Series 107, School of Economics, Kwansei Gakuin University, revised Jul 2013.
    4. He, Haoran & Villeval, Marie Claire, 2017. "Are group members less inequality averse than individual decision makers?," Journal of Economic Behavior & Organization, Elsevier, vol. 138(C), pages 111-124.
    5. Tao, Hung-Lin, 2015. "Multiple earnings comparisons and subjective earnings fairness: A cross-country study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 45-54.
    6. Eisenkopf, Gerald, 2014. "The impact of management incentives in intergroup contests," European Economic Review, Elsevier, vol. 67(C), pages 42-61.
    7. Yingchao Zhang & Oliver Fabel & Christian Thomann, 2015. "Pay inequity effects on back-office employees’ job performances: the case of a large insurance firm," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 23(2), pages 421-439, June.
    8. Haoran He & Marie Claire Villeval, 2014. "Are team members less inequality averse than individual decision makers?," Working Papers halshs-00996545, HAL.
    9. Paetzel, Fabian & Sausgruber, Rupert, 2017. "Entitlements and Loyalty in Groups: An Experimental Study," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168224, Verein für Socialpolitik / German Economic Association.

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    Keywords

    Desert; Deservingness; Equity; Inequity aversion; Loss aversion; Reference-dependent preferences; Guilt; Reciprocity; Social norms; Team production;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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