A tractable model of process fairness under risk

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Abstract

This paper proposes a social utility model of individual preferences for process fairness that complements the Fehr–Schmidt model for outcome fairness. The model assumes that the outcome generating process rather than the actual outcomes influences fairness perceptions, and that process fairness is evaluated through comparison of expected payoffs. The process model successfully predicts data from bargaining games involving risky payoffs that neither outcome-based nor reciprocity models can explain. In a theoretical application, Machina’s parental example for non-expected utility in a distributional problem (Machina’s Mom) is analyzed by incorporating individual level process fairness preferences under expected utility.
Original languageEnglish
Pages (from-to)803-813
JournalJournal of Economic Psychology
Volume30
Issue number5
DOIs
Publication statusPublished - 2009

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