Fairness: A Critique to the Utilitarian Approach
Philipp Kircher (),
Alvaro Sandroni and
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich
We address a basic diffculty with incorporating fairness into standard utilitarian choice theories. Standard utilitarian theories evaluate lotteries according to the (weighted) utility over ?nal outcomes and assume in particular that a lottery is never preferred over getting the most preferred underlying outcome with ertainty. While nearly universally adopted in economics (including behavioral economics) and appealing for choices among consumption goods, this approach is problematic when choices directly affect the payoffs of other individuals. A difficulty is that randomization may in itself be valued as a desirable procedure for allocating scarce resources. We highlight this in two simple choice settings. Individuals can choose between three options: to get more money; to get less money and someo ther good; to flip a coin between these two alternatives. When the good is a regular consumption good like a coffeemug, hardly any of our subjects randomize. When the good is a social good that yields payoffs directly to some other individual,nearly a third of our subjects choose to randomize. Our results indicate that fairness concerns are conducive to behavioral anomalies that the standard utilitarian model cannot accommodate.
Keywords: risky choice; betweenness axiom; social preferences; preference for randomness (search for similar items in EconPapers)
JEL-codes: D81 C91 D63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp, nep-hpe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:288
Access Statistics for this paper
More papers in Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich Geschwister-Scholl-Platz 1, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().