A Preference Foundation for Fehr and Schmidt's Model of Inequity Aversion

Kirsten I.M. Rohde*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Fehr and Schmidt (FS) introduced an influential social utility function for individuals in interpersonal contexts that captures self-centered inequity aversion. The value of this social utility function lies in its exceptionally good balance between parsimony and fit. This paper provides a preference foundation for exactly the model of FS with preference conditions that exactly capture the exceptionally good balance of FS. Remarkably, FS is a special case of Schmeidler's rank-dependent utility for decision under uncertainty.

Original languageEnglish
Pages (from-to)537-547
Number of pages11
JournalSocial Choice and Welfare
Volume34
Issue number4
DOIs
Publication statusPublished - 2010
Externally publishedYes

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