Desert and inequity aversion in teams

Abstract

a b s t r a c tTeams 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 their 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.

Fairness considerations in joint venture formation

“…More generally, we provide suggestive evidence that fairness concerns may have negative macroeconomic impacts by reducing the likelihood of profitable firm formation. A similar result is found in a model of output sharing within teams in Gill and Stone (2015), where fairness concerns can lead to a significant level of inefficiency in team members' effort choices.…”

Are group members less inequality averse than individual decision makers?

“…Note that one can find studies on how inequality aversion in groups affects contractual design (Rey-Biel, 2008;Bartling and von Siemens, 2010), sharing rules(Gill and Stone, 2015), peer pressure(Mohnen et al, 2008), or sanction and cooperation(Masclet and Villeval, 2008).…”

Multiple earnings comparisons and subjective earnings fairness: A cross-country study

“…Akerlof and Yellen (1990) stated, "The motivation for the fair wage-effort hypothesis is a simple observation concerning human behavior: when people do not get what they deserve, they try to get even." Economists investigating fairness or equity usually follow Yellen's (1988, 1990) definition; some of them include Skott (2005), Epstein and Ward (2006), Charness and Kuhn (2007), San and Jane (2008), and Gill and Stone (2015).…”