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Concept
Inequity aversion
Summary
Inequity aversion (IA) is the preference for fairness and resistance to incidental inequalities. The social sciences that study inequity aversion include sociology, economics, psychology, anthropology, and ethology. Researches on inequity aversion aim to explain behaviors that are not purely driven by self-interests but fairness considerations.
In some literature, the terminology inequality aversion was used in the places of inequity aversion. The discourses in social studies argue that "inequality" pertains to the gap between the distribution of resources, while "inequity" pertains to the fundamental and institutional unfairness. Therefore, the choice between using inequity or inequality aversion may depend on the specific context.
Inequity aversion research on humans mostly occurs in the discipline of economics though it is also studied in sociology.
Research on inequity aversion began in 1978 when studies suggested that humans are sensitive to inequities in favor of as well as those against them, and that some people attempt overcompensation when they feel "guilty" or unhappy to have received an undeserved reward.
A more recent definition of inequity aversion (resistance to inequitable outcomes) was developed in 1999 by Fehr and Schmidt. They postulated that people make decisions so as to minimize inequity in outcomes. Specifically, consider a setting with individuals {1,2,...,n} who receive pecuniary outcomes xi. Then the utility to person i would be given by
where α parametrizes the distaste of person i for disadvantageous inequality in the first nonstandard term, and β parametrizes the distaste of person i for advantageous inequality in the final term. The results suggested that a small fraction of selfish behaviors may influence the majority with a fair mind to act selfishly in some scenarios, while a minority of fair-minded behaviors may also affect selfish players to cooperate in games with punishment. In addition, the inequity aversion mindset may affect market outcomes even in the presence of very competitive competition.
Official source
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