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Justice among strangers. On altruism, inequality aversion and fairness

  • Luciano Andreozzi

    ()

  • Matteo Ploner

    ()

  • Ivan Soraperra

We present an axiomatic model of choice involving two agents, motivated by the experimental evidence on non-selfish preferences. We distinguish two classes of social preferences, depending on whether they are or not separable. Altruism and spite (Andreoni & Miller, 2002; Cox et al., 2007) are separable, while the various forms of inequality aversion are not (Fehr & Schmidt, 1999; Bolton & Ockenfels, 2000; Charness & Rabin, 2002). Separable and non-separable preferences give very close predictions when only sure outcomes are involved, but they make opposite predictions in choices involving lotteries. We show this by proposing a generalization of expected utility that accounts for preferences for “fair procedures”, which violate the independence axiom. An experimental test of the model reveals little evidence of ex-post inequality aversion, even when non-expected utility preferences are accounted for.

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Paper provided by Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia in its series CEEL Working Papers with number 1304.

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Date of creation: 2013
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Handle: RePEc:trn:utwpce:1304
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  1. Cox, James C. & Friedman, Daniel & Gjerstad, Steven, 2007. "A tractable model of reciprocity and fairness," Games and Economic Behavior, Elsevier, vol. 59(1), pages 17-45, April.
  2. Blanco, Mariana & Engelmann, Dirk & Normann, Hans Theo, 2011. "A within-subject analysis of other-regarding preferences," Games and Economic Behavior, Elsevier, vol. 72(2), pages 321-338, June.
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  7. Gary E Bolton & Jordi Brandts & Axel Ockenfels, 2005. "Fair Procedures: Evidence from Games Involving Lotteries," Economic Journal, Royal Economic Society, vol. 115(506), pages 1054-1076, October.
  8. Michal Krawczyk & Fabrice Le Lec, 2010. "‘Give me a chance!’ An experiment in social decision under risk," Experimental Economics, Springer, vol. 13(4), pages 500-511, December.
  9. Fudenberg, Drew & Lavine, David K., 2012. "Fairness, Risk Preferences and Independence: Impossibility Theorems," Scholarly Articles 11022184, Harvard University Department of Economics.
  10. Raymond Fisman & Shachar Kariv & Daniel Markovits, 2005. "Individual Preferences for Giving," Game Theory and Information 0504007, EconWPA.
  11. Epstein, Larry G & Segal, Uzi, 1992. "Quadratic Social Welfare Functions," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 691-712, August.
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  13. Edi Karni & Zvi Safra, 2002. "Individual Sense of Justice: A Utility Representation," Econometrica, Econometric Society, vol. 70(1), pages 263-284, January.
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  15. James C. Cox & Vjollca Sadiraj, . "Direct Tests of Models of Social Preferences and a New Model," Experimental Economics Center Working Paper Series 2006-13, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Jul 2010.
  16. Ben-Porath, Elchanan & Gilboa, Itzhak & Schmeidler, David, 1997. "On the Measurement of Inequality under Uncertainty," Journal of Economic Theory, Elsevier, vol. 75(1), pages 194-204, July.
  17. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  18. Martin Dufwenberg & Paul Heidhues & Georg Kirchsteiger & Frank Riedel & Joel Sobel, 2011. "Other-Regarding Preferences in General Equilibrium," ULB Institutional Repository 2013/149598, ULB -- Universite Libre de Bruxelles.
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  20. Falk, Armin & Fehr, Ernst & Fischbacher, Urs, 2008. "Testing theories of fairness--Intentions matter," Games and Economic Behavior, Elsevier, vol. 62(1), pages 287-303, January.
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  23. Peter A. Diamond, 1967. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparison of Utility: Comment," Journal of Political Economy, University of Chicago Press, vol. 75, pages 765.
  24. Kirsten Rohde, 2010. "A preference foundation for Fehr and Schmidt’s model of inequity aversion," Social Choice and Welfare, Springer, vol. 34(4), pages 537-547, April.
  25. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
  26. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
  27. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
  28. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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