IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/36864.html
   My bibliography  Save this paper

Desert and inequity aversion in teams

Author

Listed:
  • 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 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.

Suggested Citation

  • David, Gill & Rebecca, Stone, 2012. "Desert and inequity aversion in teams," MPRA Paper 36864, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36864
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/36864/1/MPRA_paper_36864.pdf
    File Function: original version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/38257/1/MPRA_paper_38257.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pedro Rey‐Biel, 2008. "Inequity Aversion and Team Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 297-320, June.
    2. Bossert W., 1996. "Redistribution mechanisms based on individual characteristics," Mathematical Social Sciences, Elsevier, vol. 31(1), pages 51-51, February.
    3. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 255-283.
    4. Encinosa III, William E. & Gaynor, Martin & Rebitzer, James B., 2007. "The sociology of groups and the economics of incentives: Theory and evidence on compensation systems," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 187-214, February.
    5. Ziv, Amir, 1993. "Performance Measures and Optimal Organization," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 9(1), pages 30-50, April.
    6. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
    7. Ziv, A, 2000. "Information technology and optimal firm structure," Journal of Accounting Research, Wiley Blackwell, vol. 38(2), pages 297-328.
    8. Björn Bartling & Ferdinand A. von Siemens, 2010. "Equal Sharing Rules in Partnerships," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 299-320, June.
    9. Vincent P. Crawford & Juanjuan Meng, 2011. "New York City Cab Drivers' Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income," American Economic Review, American Economic Association, vol. 101(5), pages 1912-1932, August.
    10. Rachel T. A. Croson, 2007. "Theories Of Commitment, Altruism And Reciprocity: Evidence From Linear Public Goods Games," Economic Inquiry, Western Economic Association International, vol. 45(2), pages 199-216, April.
    11. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    12. Timothy Cason & Tatsuyoshi Saijo & Takehiko Yamato, 2002. "Voluntary Participation and Spite in Public Good Provision Experiments: An International Comparison," Experimental Economics, Springer;Economic Science Association, vol. 5(2), pages 133-153, October.
    13. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
    14. Ferdinand A. von Siemens, 2012. "Social Preferences, Sorting, and Competition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 780-807, September.
    15. Ferdinand A. von Siemens, 2011. "Heterogeneous social preferences, screening, and employment contracts," Oxford Economic Papers, Oxford University Press, vol. 63(3), pages 499-522, July.
    16. Corgnet, Brice & Hernan-Gonzalez, Roberto & Rassenti, Stephen, 2015. "Peer Pressure and Moral Hazard in Teams: Experimental Evidence," Review of Behavioral Economics, now publishers, vol. 2(4), pages 379-403, December.
    17. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    18. Battigalli, Pierpaolo & Dufwenberg, Martin, 2009. "Dynamic psychological games," Journal of Economic Theory, Elsevier, vol. 144(1), pages 1-35, January.
    19. Dufwenberg, Martin & Kirchsteiger, Georg, 2004. "A theory of sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 47(2), pages 268-298, May.
    20. Peyton Young, H., 1998. "Social norms and economic welfare1," European Economic Review, Elsevier, vol. 42(3-5), pages 821-830, May.
    21. Gill, David & Stone, Rebecca, 2010. "Fairness and desert in tournaments," Games and Economic Behavior, Elsevier, vol. 69(2), pages 346-364, July.
    22. Kohei Daido & Takeshi Murooka, 2016. "Team Incentives and Reference‐Dependent Preferences," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(4), pages 958-989, December.
    23. Brice Corgnet & Roberto Hernán-González & Stephen Rassenti, 2011. "Real Effort, Real Leisure and Real-time Supervision: Incentives and Peer Pressure in Virtual Organizations," Working Papers 11-05, Chapman University, Economic Science Institute.
    24. Yeon-Koo Che & Seung-Weon Yoo, 2001. "Optimal Incentives for Teams," American Economic Review, American Economic Association, vol. 91(3), pages 525-541, June.
    25. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    26. Cason, Timothy N. & Saijo, Tatsuyoshi & Yamato, Takehiko & Yokotani, Konomu, 2004. "Non-excludable public good experiments," Games and Economic Behavior, Elsevier, vol. 49(1), pages 81-102, October.
    27. 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.
    28. Huck, Steffen & Kübler, Dorothea & Weibull, Jörgen, 2012. "Social norms and economic incentives in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 83(2), pages 173-185.
    29. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
    30. Kölle, Felix & Sliwka, Dirk & Zhou, Nannan, 2011. "Inequality, Inequity Aversion, and the Provision of Public Goods," IZA Discussion Papers 5514, Institute of Labor Economics (IZA).
    31. Urs Fischbacher & Simon Gachter, 2010. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Goods Experiments," American Economic Review, American Economic Association, vol. 100(1), pages 541-556, March.
    32. Alwine Mohnen & Kathrin Pokorny & Dirk Sliwka, 2008. "Transparency, Inequity Aversion, and the Dynamics of Peer Pressure in Teams: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 26(4), pages 693-720, October.
    33. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    34. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-817, August.
    35. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    36. Dominique Demougin & Claude Fluet & Carsten Helm, 2006. "Output and wages with inequality averse agents," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(2), pages 399-413, May.
    37. Ramarao Desiraju & David E. M. Sappington, 2007. "Equity and Adverse Selection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 285-318, June.
    38. Dominique Demougin & Claude Fluet, 2003. "Inequity Aversion in Tournaments," Cahiers de recherche 0322, CIRPEE.
    39. Johannes Abeler & Steffen Altmann & Sebastian Kube & Matthias Wibral, 2010. "Gift Exchange and Workers' Fairness Concerns: When Equality is Unfair," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1299-1324, December.
    40. Botond Koszegi & Matthew Rabin, 2007. "Reference-Dependent Risk Attitudes," American Economic Review, American Economic Association, vol. 97(4), pages 1047-1073, September.
    41. Peter Kuhn & Marie Claire Villeval, 2015. "Are Women More Attracted to Co‐operation Than Men?," Economic Journal, Royal Economic Society, vol. 125(582), pages 115-140, February.
    42. Konow, James, 1996. "A positive theory of economic fairness," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 13-35, October.
    43. Erin L. Krupka & Roberto A. Weber, 2013. "Identifying Social Norms Using Coordination Games: Why Does Dictator Game Sharing Vary?," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 495-524, June.
    44. David Gill & Victoria Prowse, 2012. "A Structural Analysis of Disappointment Aversion in a Real Effort Competition," American Economic Review, American Economic Association, vol. 102(1), pages 469-503, February.
    45. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
    46. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    47. Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, vol. 97(2), pages 170-176, May.
    48. Armin Falk & Urs Fischbacher & Simon Gächter, 2013. "Living In Two Neighborhoods—Social Interaction Effects In The Laboratory," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 563-578, January.
    49. Chaim Fershtman & Uri Gneezy & John A. List, 2012. "Equity Aversion: Social Norms and the Desire to Be Ahead," American Economic Journal: Microeconomics, American Economic Association, vol. 4(4), pages 131-144, November.
    50. Hideshi Itoh, 2004. "Moral Hazard and Other‐Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45, March.
    51. Ola Kvaløy & Trond E. Olsen, 2006. "Team Incentives in Relational Employment Contracts," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 139-170, January.
    52. Rafael Rob & Peter Zemsky, 2002. "Social Capital, Corporate Culture, and Incentive Intensity," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 243-257, Summer.
    53. Alexander W. Cappelen & Astri Drange Hole & Erik Ø Sørensen & Bertil Tungodden, 2007. "The Pluralism of Fairness Ideals: An Experimental Approach," American Economic Review, American Economic Association, vol. 97(3), pages 818-827, June.
    54. van Dijk, Frans & Sonnemans, Joep & van Winden, Frans, 2001. "Incentive systems in a real effort experiment," European Economic Review, Elsevier, vol. 45(2), pages 187-214, February.
    55. R. Isaac & James Walker, 1998. "Nash as an Organizing Principle in the Voluntary Provision of Public Goods: Experimental Evidence," Experimental Economics, Springer;Economic Science Association, vol. 1(3), pages 191-206, December.
    56. Huddart, Steven & Liang, Pierre Jinghong, 2005. "Profit sharing and monitoring in partnerships," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 153-187, December.
    57. Philip Babcock & Kelly Bedard & Gary Charness & John Hartman & Heather Royer, 2011. "Letting Down the Team? Evidence of Social Effects of Team Incentives," NBER Working Papers 16687, National Bureau of Economic Research, Inc.
    58. Brent Boning & Casey Ichniowski & Kathryn Shaw, 2007. "Opportunity Counts: Teams and the Effectiveness of Production Incentives," Journal of Labor Economics, University of Chicago Press, vol. 25(4), pages 613-650.
    59. Krupka, Erin & Weber, Roberto A., 2009. "The focusing and informational effects of norms on pro-social behavior," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 307-320, June.
    60. Gerald Eisenkopf & Sabrina Teyssier, 2010. "Envy and Loss Aversion in Tournaments," TWI Research Paper Series 52, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    61. 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.
    62. Bartling, Björn, 2011. "Relative performance or team evaluation? Optimal contracts for other-regarding agents," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 183-193, August.
    63. Eisenkopf, Gerald & Teyssier, Sabrina, 2013. "Envy and loss aversion in tournaments," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 240-255.
    64. Desiraju, Ramarao & Sappington, David E.M., 2007. "Equity and adverse selection with correlated costs," Economics Letters, Elsevier, vol. 95(3), pages 402-407, June.
    65. Marc Fleurbaey & Walter Bossert, 1996. "Redistribution and compensation (*)," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 13(3), pages 343-355.
    66. James Konow, 2000. "Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions," American Economic Review, American Economic Association, vol. 90(4), pages 1072-1091, September.
    67. Laury, Susan K. & Holt, Charles A., 2008. "Voluntary Provision of Public Goods: Experimental Results with Interior Nash Equilibria," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 84, pages 792-801, Elsevier.
    68. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
    69. Norman Frohlich & Joe Oppenheimer & Anja Kurki, 2004. "Modeling Other-Regarding Preferences and an Experimental Test," Public Choice, Springer, vol. 119(1_2), pages 91-117, April.
    70. Dominique Demougin & Claude Denys Fluet, 2003. "Group vs. Individual Performance Pay When Workers Are Envious," CIRANO Working Papers 2003s-10, CIRANO.
    71. Bicchieri,Cristina, 2006. "The Grammar of Society," Cambridge Books, Cambridge University Press, number 9780521574907, November.
    72. Knez, Marc & Simester, Duncan, 2001. "Firm-Wide Incentives and Mutual Monitoring at Continental Airlines," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 743-772, October.
    73. Sugden, Robert, 1984. "Reciprocity: The Supply of Public Goods through Voluntary Contributions," Economic Journal, Royal Economic Society, vol. 94(376), pages 772-787, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gill, David & Stone, Rebecca, 2010. "Fairness and desert in tournaments," Games and Economic Behavior, Elsevier, vol. 69(2), pages 346-364, July.
    2. Gill, David & Stone, Rebecca, 2009. "Fairness and desert in tournaments," Discussion Paper Series In Economics And Econometrics 903, Economics Division, School of Social Sciences, University of Southampton.
    3. Gill, David & Stone, Rebecca, 2009. "Fairness and desert in tournaments," Discussion Paper Series In Economics And Econometrics 0903, Economics Division, School of Social Sciences, University of Southampton.
    4. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    5. Livio, Luca & De Chiara, Alessandro, 2019. "Friends or foes? Optimal incentives for reciprocal agents," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 245-278.
    6. 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.
    7. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    8. Breitmoser, Yves & Vorjohann, Pauline, 2018. "Welfare-Based Altruism," Rationality and Competition Discussion Paper Series 89, CRC TRR 190 Rationality and Competition.
    9. Bierbrauer, Felix & Netzer, Nick, 2016. "Mechanism design and intentions," Journal of Economic Theory, Elsevier, vol. 163(C), pages 557-603.
    10. Kohei Daido & Takeshi Murooka, 2016. "Team Incentives and Reference‐Dependent Preferences," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(4), pages 958-989, December.
    11. Jacobs Martin, 2016. "Accounting for Changing Tastes: Approaches to Explaining Unstable Individual Preferences," Review of Economics, De Gruyter, vol. 67(2), pages 121-183, August.
    12. Rustichini, Aldo & Villeval, Marie Claire, 2014. "Moral hypocrisy, power and social preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 10-24.
    13. Gross, Till & Guo, Christopher & Charness, Gary, 2015. "Merit pay and wage compression with productivity differences and uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 233-247.
    14. Bental, Benjamin & Kragl, Jenny, 2021. "Inequality and incentives with societal other-regarding preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1298-1324.
    15. Dominik Erharter, 2012. "Credence goods markets, distributional preferences and the role of institutions," Working Papers 2012-11, Faculty of Economics and Statistics, Universität Innsbruck.
    16. Felix Kölle & Dirk Sliwka & Nannan Zhou, 2016. "Heterogeneity, inequity aversion, and group performance," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(2), pages 263-286, February.
    17. Breitmoser, Yves & Vorjohann, Pauline, 2022. "Fairness-based Altruism," Center for Mathematical Economics Working Papers 666, Center for Mathematical Economics, Bielefeld University.
    18. Dufwenberg, Martin & Patel, Amrish, 2017. "Reciprocity networks and the participation problem," Games and Economic Behavior, Elsevier, vol. 101(C), pages 260-272.
    19. Charness, Gary & Naef, Michael & Sontuoso, Alessandro, 2019. "Opportunistic conformism," Journal of Economic Theory, Elsevier, vol. 180(C), pages 100-134.
    20. Ridinger, Garret, 2018. "Ownership, punishment, and norms in a real-effort bargaining experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 382-402.

    More about this item

    Keywords

    Desert; Deservingness; Equity; Inequity aversion; Loss aversion; Reference-dependent 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36864. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.