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Desert and Inequity Aversion in Teams

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  • David Gill
  • Rebecca Stone

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 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 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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  • David Gill & Rebecca Stone, 2011. "Desert and Inequity Aversion in Teams," Economics Series Working Papers 563, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:563
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    Keywords

    Desert; deservingness; equity; inequity aversion; loss aversion; reference-dependence preferences; guilt; reciprocity; social norms; team production;
    All these keywords.

    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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