On Measuring Compassion in Social Preferences Do Gender, Price of Giving, or Inequality Matter?

Abstract

This paper incorporates compassion into social preferences and tracks individuals' choices over ten allocation decisions, categorizing participants' behavior more precisely than previous work. We provide important evidence relevant to the on-going debate as to whether social preferences are better characterized as inequity aversion or social surplus maximization. We find social preferences to be heterogeneous: approximately two-thirds of participants exhibit consistent preferences in all ten exercises and other-regarding individuals are almost evenly split between inequity aversion and social surplus maximization. Women are significantly more likely than men to be inequity averters and less likely to be social surplus maximizers. A large majority of participants choose one or more allocations consistent with compassion but which reduce own payoff, increase inequality, or reduce social surplus. Individuals respond to lower prices of giving by being less self-interested and to larger payoff gaps by being more compassionate. Men are more responsive than women to the price of giving because they are more often social surplus maximizers who react more to costs while women are more often inequity averters who are less sensitive to the price of giving.