Inequity Aversion May Increase Inequity

Inequity Aversion May Increase Inequity*

The Economic Journal 117 (519) , C192–C204 doi:10.1111/j.1468-0297.2007.02041.x

Maria Montero1
1University of Nottingham
* I am grateful to Guillaume Fréchette, Simon Gächter, John Kagel, Akira Okada, Alex Possajennikov, Gerald Pech, Jan Potters, Daniel Seidmann, three anonymous referees, and seminar/workshop audiences at the second CREED-CeDEx workshop, the University of the Basque Country, the 11th Coalition Theory Network Workshop and RES 2006 for helpful comments.
Abstract
Inequity aversion models have been used to explain equitable payoff divisions in bargaining games. I show that inequity aversion can actually increase the asymmetry of payoff division if unanimity is not required. This is because responders may be willing to accept a lower share rather than risk being left out. Inequity aversion may also affect comparative statics: the advantage of being the proposer can decrease as players become more impatient.

Preferences over location-scale family

Preferences over location-scale family

http://www.springerlink.com/content/8u35m066117132q8/fulltext.pdf
Journal Economic Theory
Publisher Springer Berlin / Heidelberg
ISSN 0938-2259 (Print) 1432-0479 (Online)
Category Research Article
DOI 10.1007/s00199-007-0254-3
Subject Collection Business and Economics
SpringerLink Date Wednesday, May 16, 2007

Wing-Keung Wong 1, 2 and Chenghu Ma 3

(1) Risk Management Institute and Department of Economics, National University of Singapore, Singapore, 117568, Singapore
(2) Department of Economics, Hong Kong Baptist University, Hong Kong, China
(3) Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, China

Abstract This paper extends the work on location-scale (LS) family with general n random seed sources. First, we clarify and generalize existing results in this multivariate setting. Some useful geometrical and topological properties of the location-scale expected utility functions are obtained. Second, we introduce and study some general non-expected utility functions defined over the LS family. Special care is taken in characterizing the shapes of the indifference curves induced by the location-scale expected utility functions and non-expected utility functions. Finally, efforts are also made to study several well-defined partial orders and dominance relations defined over the LS family. These include the first- and second-order stochastic dominances, the mean-variance rule, and a newly defined location-scale dominance.
Keywords Location-scale family - Inverse problem - Non-expected utility function - Stochastic dominance - Location-scale dominance - Mean-variance rule

JEL Classification Numbers G11 - C60 - G10

Axiomatic foundations for fairness-motivated preferences

Axiomatic foundations for fairness-motivated preferences

PDF (348.5 KB)

Journal Social Choice and Welfare
Publisher Springer Berlin / Heidelberg
ISSN 0176-1714 (Print) 1432-217X (Online)
Category Original Paper
DOI 10.1007/s00355-008-0296-x
Subject Collection Business and Economics
SpringerLink Date Saturday, February 09, 2008

Martin Eiliv Sandbu 1

(1) Department of Legal Studies and Business Ethics, Wharton School, University of Pennsylvania, 3730 Walnut Street, Philadelphia, PA 19104, USA
Received: 11 May 2006 Accepted: 22 January 2008 Published online: 9 February 2008

Abstract Much work in social choice theory takes individual preferences as uninvestigated inputs into aggregation functions designed to reflect considerations of fairness. Advances in experimental and behavioural economics show that fairness can also be an important motivation in the preferences of individuals themselves. A proper characterisation of how fairness concerns enter such preferences can enrich the informational basis of many social choice exercises. This paper proposes axiomatic foundations for individual fairness-motivated preferences that cover most of the models developed to rationalise observed behaviour in experiments. These models fall into two classes: Outcome-based models, which see preferences as defined only over distributive outcomes, and context-dependent models, which allow rankings over distributive outcomes to change systematically with non-outcome factors. I accommodate outcome-based and context-sensitive fairness concerns by modelling fairness-motivated preferences as a reference-dependent preference structure. I first present a set of axioms and two theorems that generate commonly used outcome-based models as special cases. I then generalise the axiomatic basis to allow for reference-dependence, and derive a simple functional form in which the weight on each person’s payoff depends on a reference vector of how much each person deserves.

Axiomatic reference-dependence in behavior toward others and toward risk

Axiomatic reference-dependence in behavior toward others and toward risk

http://www.springerlink.com/content/q5523605771w6163/fulltext.pdf

Journal Economic Theory
Publisher Springer Berlin / Heidelberg
ISSN 0938-2259 (Print) 1432-0479 (Online)
Issue Volume 28, Number 3 / August, 2006
Category Research Article
DOI 10.1007/s00199-005-0643-4
Pages 681-692

William S. Neilson1

(1) Department of Economics, Texas A&M University, College Station, TX 77843-4228, USA

Summary. This paper considers the applicability of the standard separability axiom for both risk and other-regarding preferences, and advances arguments why separability might fail. An alternative axiom, which is immune to these arguments, leads to a preference representation that is additively separable in a reference variable and the differences between the other variables and the reference variable. For other-regarding preferences the reference variable is the decision-maker’s own payoff, and the resulting representation coincides with the Fehr-Schmidt model. For risk preferences the reference variable is initial wealth, and the resulting representation is a generalization of prospect theory.
Keywords and Phrases: Other-regarding preferences - Risk - Separability - Axiomatic foundation - Prospect theory.

Received: 28 April 2004, Revised: 27 April 2005,
JEL Classification Numbers: D81, D64.

Multilateral Bargaining

Review of Economic Studies (1996) 63, 61-80

Multilateral Bargaining

VIJAY KRISHNA
The Pennsylvania State University
and
ROBERTO SERRANO
Brown University

First version received May 1993;$nu1 version accepted July 1995 (Eds.)

We study a multilateral bargaining procedure that extends Rubinstein's alternating offer
game to the case of n players. The procedure captures the notion of consistency in the sense
familiar in cooperative game theory and we use it to establish links to the axiomatic theory of
bargaining.

Reduced games, consistency, and the core

Reduced games, consistency, and the core

Journal	International Journal of Game Theory
Publisher	Physica Verlag, An Imprint of Springer-Verlag GmbH
ISSN	0020-7276 (Print) 1432-1270 (Online)
Issue	Volume 20, Number 4 / December, 1992
DOI	10.1007/BF01271129
Pages	325-334

K. Tadenuma¹

(1)	Department of Economics, Hitotsubashi University, 2-1 Naka, Kunitachi, 186 Tokyo, Japan

Received: 15 October 1990 Revised: 15 October 1991

Abstract This paper establishes an axiomatization of the core by means of an internal consistency property with respect to a new reduced game introduced by Moulin (1985). Given a payoff vector chosen by a solution for some game, and given a subgroup of agents, we define thereduced game as that in which each coalition in the subgroup could attain payoffs to its members only if they are compatible with the initial payoffs toall the members outside of the subgroup. The solution isconsistent if it selects the same payoff distribution for the reduced game as initially. We show that consistency together with individual rationality characterizes the core of both transferable and non-transferable utility games.

The author would be grateful to William Thomson, Hervé Moulin and a referee for helpful comments on earlier versions of this paper. Financial support of the Seimeikai is also gratefully acknowledged.

On the reduced game property and its converse

On the reduced game property and its converse

Journal	International Journal of Game Theory
Publisher	Physica Verlag, An Imprint of Springer-Verlag GmbH
ISSN	0020-7276 (Print) 1432-1270 (Online)
Issue	Volume 15, Number 3 / September, 1986
DOI	10.1007/BF01769258
Pages	187-200

B. Peleg¹

(1)	Institute of Mathematics, The Hebrew University, 91904 Jerusalem, Israel

Received: 15 November 1984 Revised: 15 August 1985

Abstract We investigate the relationship between two solutions, the core and the prekernel, and reduced games of coalitional games. An axiomatic characterization of these two solutions is obtained by means of the reduced game property and its converse.

This research was partially supported by The Institute for Advanced Studies, The Hebrew University, 91904 Jerusalem, Israel, during 1979–1980.

Reduced game and converse consistency

http://dx.doi.org/10.1016/j.geb.2006.08.002

Reduced game and converse consistency

Chih Chang^a and Cheng-Cheng Hu^{b, ,
a}Department of Mathematics, National Tsing Hua University, Hsinchu, Taiwan
^bCenter for General Education, Southern Taiwan University of Technology, No. 1, Nantai Street, Yung-Kang City, 71005 Tainan County, Taiwan
Received 17 August 2004. Available online 12 September 2006.

Abstract

The initiating points of the current paper are the axiomatic characterizations, in terms of consistency, of the equal allocation of nonseparable cost value (by Moulin), the Shapley value (by Hart and Mas-Colell), and the prenucleolus (by Orshan). The basic axioms are the same, but three different reduced games can be used to distinguish these three solutions. The main purpose of the paper is to illustrate that besides the definitions of reduced games are different, the axiom converse consistency also plays an important role to distinguish these three solutions.

Keywords: Shapley value; Prenucleolus; EANSC value; Reduced game; Consistency; Bilateral consistency; Converse consistency

JEL classification codes: C71

The Converse Consistency Principle in Bargaining

http://dx.doi.org/10.1006/game.2001.0907

The Converse Consistency Principle in Bargaining^*1

Youngsub Chun
School of Economics, Seoul National University, Seoul, 151-742, Korea^f1
Received 8 August 2000. Available online 18 June 2002.

Abstract

We investigate the implications of converse consistency in the context of bargaining. A solution is conversely consistent if, whenever, for some problem, a feasible alternative has the property that for all proper subgroups of the agents it involves, the solution chooses the restriction of the alternative to the subgroup for the associated reduced problem this subgroup faces, then the alternative should be the solution outcome for the problem. We present two alternative characterizations of the egalitarian solution based on converse consistency as well as either weak consistency or population monotonicity, in addition to other standard axioms of weak Pareto optimality, symmetry, and continuity. However, if we strengthen weak Pareto optimality to Pareto optimality, various impossibility results are obtained. On the other hand, the Nash solution is characterized on the basis of a weaker version of converse consistency, which applies its hypotheses only to the problem whose solution outcome is smooth.

Journal of Economic Literature Classification Numbers: C71, C78, D70.

Author Keywords: bargaining problem; converse consistency; egalitarian solution; Nash solution

Axiomatizations of neoclassical concepts for economies

http://dx.doi.org/10.1016/S0304-4068(97)00025-6

Axiomatizations of neoclassical concepts for economies

Roberto Serrano^* and Oscar Volij
Department of Economics, Brown University, Providence, RI 02912, USA
Received 10 October 1996; accepted 2 May 1997. Available online 28 January 1999.

Abstract

We characterize the Pareto correspondence, the core and the Walras solution using the axioms of consistency, converse consistency and one-person rationality. Consistency and its converse are defined with respect to suitably constructed reduced economies for each case. Our results hold for the well-known class of coalitional production economies, which covers exchange economies as a particular case. The key reason to use this class is the observation that the reduction of an exchange economy yields a production economy.

Author Keywords: Consistency; Reduced economy; Core; Walrasian equilibrium

A non-cooperative interpretation of the f-just rules of bankruptcy problems

http://dx.doi.org/10.1016/j.geb.2007.10.005
Copyright © 2007 Elsevier Inc. All rights reserved.

A non-cooperative interpretation of the f-just rules of bankruptcy problems

Chih Chang, and Cheng-Cheng Hu,

a Department of Mathematics, National Tsing Hua University, 30013, Hsinchu, Taiwan
b Center for General Education, Southern Taiwan University of Technology, 71005, Tainan, Taiwan
Received 9 May 2005. Available online 6 November 2007.



Abstract
First, we propose an axiomatic characterization of the f-just rules. Second, based on the result, a game is designed and a non-cooperative interpretation of the f-just rules is provided.

Keywords: Bankruptcy problem; f-just rule; Bilateral consistency; Converse consistency

JEL classification codes: C72; D63