Inequity Aversion May Increase Inequity

Author: Montero, Maria

Source: The Economic Journal, Volume 117, Number 519, March 2007 , pp. C192-C204(13)

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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.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1468-0297.2007.02041.x

Affiliations: 1: University of Nottingham

Publication date: 2007-03-01