Estimating social preferences using stated satisfaction: Novel support for inequity aversion

Lina Diaz, Daniel Houser, John Ifcher and Homa Zarghamee

European Economic Review, 2023, vol. 155, issue C

Abstract: Experimental identification of social preferences often uses a revealed-preference approach, whereby participants make choices over payment distributions for themselves and others. We introduce an alternative “stated satisfaction” approach: participants directly report their satisfaction with various payment-profiles that hold their own payment constant while varying another participant's payment. We then use our data to estimate the unrestricted parameters of the Fehr and Schmidt (1999) model to determine participants’ social preferences. While the Fehr and Schmidt parameter-assumptions make it a model of inequity aversion, alternate parameter-assumptions can reflect different social preferences. Our methodology yields support for the Fehr and Schmidt assumptions (i.e., that both disadvantageous and advantageous inequity are utility-diminishing, the former more so than the latter) at both the aggregate and individual levels. Methodologically, eliciting satisfaction can be an easy-to-implement complement to choice-based preference-measures in contexts other than social preferences that are of interest to economists.

Keywords: Inequity aversion; Social preferences; Stated satisfaction; Laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 D31 D63 I31 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Estimating Social Preferences Using Stated Satisfaction: Novel Support for Inequity Aversion (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:155:y:2023:i:c:s001429212300065x

DOI: 10.1016/j.euroecorev.2023.104436

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