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Group Fairness and Game Theory

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  • Alejandro Tatsuo Moreno

    () (Department of Economics and Finance, Universidad de Guanajuato)

Abstract

In this paper I extend Matthew Rabins model of fairness equilibria (1993) to groups of individuals. This allow me to introduce three aspects from reality that are absent in game theory: i) individuals discriminate in favor of members of their own groups, ii) individuals like individuals that not only are kind to them, but are kind to other individuals, specially individuals of their own groups, and iii) individuals discrimate in favor of members of groups they like. I define a new equilibrium that takes in consideration this emotions, what I call group fairness equilibrium. Rabin defines the mutual-max outcomes for a single game as outcomes where each player maximize the other players material mayoffs and the mutual-min outcomes as outcomes where each player minimize the other players material payoffs. Some basic results of my model are that a combination of strict Nash equilibrium in several games, will always be a group fairness equibrium for large values of the material payoffs, and that any outcome that is either strictly mutual-max for both games or strictly mutual-min for both games is a group fairness equilibrium for large values of the material payoffs.

Suggested Citation

  • Alejandro Tatsuo Moreno, 2007. "Group Fairness and Game Theory," Department of Economics and Finance Working Papers EC200702, Universidad de Guanajuato, Department of Economics and Finance, revised Jun 2008.
  • Handle: RePEc:gua:wpaper:ec200702
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    File URL: http://economia.ugto.org/WorkingPapers/EC200702.pdf
    File Function: Revised version, 2008
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    References listed on IDEAS

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    1. Rabin, Matthew, 1997. "Fairness in Repeated Games," Department of Economics, Working Paper Series qt0nz5b4mb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    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. Dufwenberg, Martin & Kirchsteiger, Georg, 2000. "Reciprocity and wage undercutting," European Economic Review, Elsevier, vol. 44(4-6), pages 1069-1078, May.
    4. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
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