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On Inequity Aversion

  • Werner Güth

    ()

In close interaction, group allocations are often fair due to our desire to be treated fairly and to act fairly. When this desire conflicts with other strong motivations a typical reaction is to trade off fairness against these other concerns. Inequ(al)ity aversion allows capturing such trade off considerations in various ways (Bolton, 1991, Bolton and Ockenfels, 1998 and 2000, Fehr and Schmidt, 1999, are examples). Such trade off analysis measures how far one deviates from fairness what requires a unique fairness benchmark. More often than not there exist, however, multiple standards. In our view, this should not discourage using inequ(al)ity aversion altogether but limit it to where its prerequisites are granted.

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Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2005-24.

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Length: 14 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:esi:discus:2005-24
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  1. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  2. Werner G¸th & Radosveta Ivanova-Stenzel & Manfred K–nigstein & Martin Strobel, 2003. "Learning to bid - an experimental study of bid function adjustments in auctions and fair division games," Economic Journal, Royal Economic Society, vol. 113(487), pages 477-494, 04.
  3. Ernst Fehr & Klaus Schmidt, 2005. "The Rhetoric of Inequity Aversion- A Reply," NajEcon Working Paper Reviews 666156000000000616, www.najecon.org.
  4. M. Vittoria Levati & Matthias Sutter & Eline van der Heijden, 2005. "Leading by example in a public goods experiment with heterogeneity and incomplete information," Papers on Strategic Interaction 2005-17, Max Planck Institute of Economics, Strategic Interaction Group.
  5. Avner Shaked, 2005. "The Rhetoric of Inequity Aversion," NajEcon Working Paper Reviews 666156000000000612, www.najecon.org.
  6. G. Bolton, 2010. "A comparative model of bargaining: theory and evidence," Levine's Working Paper Archive 263, David K. Levine.
  7. Khalil, Elias, 2004. "Integrity, Shame and Self-Rationalization," Vassar College Department of Economics Working Paper Series 55, Vassar College Department of Economics.
  8. Guth, Werner & Huck, Steffen & Ockenfels, Peter, 1996. "Two-Level Ultimatum Bargaining with Incomplete Information: An Experimental Study," Economic Journal, Royal Economic Society, vol. 106(436), pages 593-604, May.
  9. Gantner, Anita & Guth, Werner & Konigstein, Manfred, 2001. "Equitable choices in bargaining games with joint production," Journal of Economic Behavior & Organization, Elsevier, vol. 46(2), pages 209-225, October.
  10. Guth, Werner & Huck, Steffen & Muller, Wieland, 2001. "The Relevance of Equal Splits in Ultimatum Games," Games and Economic Behavior, Elsevier, vol. 37(1), pages 161-169, October.
  11. Avner Shaked, 2005. "The Rhetoric of Inequity Aversion," Levine's Bibliography 666156000000000570, UCLA Department of Economics.
  12. Kliemt, Hartmut, 1986. "The veil of insignificance," European Journal of Political Economy, Elsevier, vol. 2(3), pages 333-344.
  13. Hermann Brandstätter & Werner Güth & Hartmut Kliemt, 2003. "The Bounds of Rationality: Philosophical, Psychological and Economic Aspects of Choice Making," Homo Oeconomicus, Institute of SocioEconomics, vol. 20, pages 303-356.
  14. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
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