|M.Sc Student||Biton Ortal|
|Subject||Inequality Aversion, Preferences and Overgeneralizations|
|Department||Department of Industrial Engineering and Management||Supervisor||Professor Ido Erev|
|Full Thesis text|
The inequity aversion hypothesis (Fehr & Schmidt, 1999) is one of the leading explanations for the observation that in some settings individuals are willing to lose money in order to enhance equality. For example, studies of the Ultimatum game show that 40% of the participants reject an unfair offer; that is, they are willing to lose money in order to minimize the payoff difference. The leading abstraction of inequity aversion treats it as an individual property that reflects stable social preferences. The first part of this paper explores the descriptive value of this interpretation by analyzing the results of a choice prediction competition that focused on simple social interactions. Although the results show some evidence for inequity aversion, other behavioral regularities, like the attempt to maximize a joint payoff, are much more important. The rejection rate in Ultimatum-like games were only around 10%. The second part of our investigation tries to improve our understanding of the weak evidence for inequity aversion (and low rejection rates) in the competition studies. The results suggest that inequity aversion is highly sensitive to small changes of the framing; the observed behavior is better described as a "specific overgeneralization" rather than as a "general social preference."