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On Inequity Aversion

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  • Werner Güth

Abstract

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.

Suggested Citation

  • Werner Güth, 2005. "On Inequity Aversion," Papers on Strategic Interaction 2005-24, Max Planck Institute of Economics, Strategic Interaction Group.
    • Handle: RePEc:esi:discus:2005-24
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    References listed on IDEAS

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