Other-Regarding Preferences, Concerns for Others' Opportunities and Violations of Stochastic Dominance: A Choice-Theoretic Analysis

Abstract

Decision makers with other-regarding preferences may care not just about others' outcomes but also about their opportunities. In social situations involving risk, this often results in their choices violating stochastic dominance, a property that underlies both expected and non-expected utility theories. We propose and axiomatize a model of other-regarding preferences, which we refer to as opportunity adjusted expected utility, that accommodates opportunity concerns and possible violations of stochastic dominance. Our model considers a set-up with a decision maker (DM) and another individual and characterizes the DM's preferences over allocation-lotteries through a representation that is based on (i) a baseline expected utility assessment and (ii) an adjustment that captures her attitude toward the other individual's opportunities.