Disadvantageous Inequity Aversion Research Articles

Refining the freeloading and no purchase behavior in pay as you wish pricing

Pay as you wish (PAYW) pricing offers a radical shift from posted pricing schemes. Modeling consumer behavior under PAYW pricing promises insights into conditions under which PAYW is profitable. Firstly, this paper extends an established model that builds on inequity-averse consumers and models their behavior in PAYW as well as the seller’s profits. The paper uses a comprehensive approach to describe consumers with low fairness concerns and points to a new segment of consumers who were not considered in previous PAYW models. They are characterized by a decision not to buy a good under a PAYW pricing policy, even if they can get it for free, and are not strongly averse to advantageous inequity. Secondly, the paper discusses the profitability of PAYW with a suggested price when the seller’s ability to suggest high prices is limited. Thirdly, the paper incorporates the effect of disadvantageous inequity aversion on PAYW with a minimum price. Finally, the paper offers guidelines on how a seller should choose the optimal pricing policy.

Younger adults are more prosocial than older adults in economic decision making results from the give and take game

The present study was designed to investigate the disadvantageous and advantageous inequity aversion of young and older adults in situations which allowed them to maximize or minimize payoff inequalities. Given the very limited evidence regarding an actual age-related effect on inequity aversion, the purpose of this study was to examine this question using an economic game, “the Give-and-Take Game”, which is able to circumvent certain limitations of the Ultimatum Game, to evaluate inequity aversion (i.e., a same behaviour which can be induced by opposite motivations: prosocial vs. pro-self vs. altruistic orientations). In the “Give-and-Take Game”, a sum of money was randomly distributed between the participant and a dummy player. These distributions created monetary inequalities, advantageous either for the participant (to examine advantageous inequity aversion) or for the other player (to examine disadvantageous inequity aversion). Different response options were proposed to the participants to either maximize or minimize payoff inequalities between the players. This procedure not only allowed to differentiate individual’s profiles with more prosocial vs. pro-self vs. altruistic orientations, but also to examine age-related effects on these profiles. The results showed that older adults showed a more important pro-self orientation compared to their younger counterparts. They more frequently selected the options which maximized their own payoffs and were less averse to advantageous inequity compared to young adults. In contrast, young adults showed a similar level of advantageous and disadvantageous inequity aversion. Older adults focused on the economic and competitive dimension of the game, which may have motivated them to maximize their own payoffs. Conversely, young adults took into account the social dimension of the game, focusing on a fair monetary distribution.

Association between arginine vasopressin receptor 1A (AVPR1A) polymorphism and inequity aversion.

Although numerous studies have focused on brain functions related to inequity aversion, few have examined its genetic basis. Here, we show the association between estimated inequity aversion and polymorphisms in three genes associated with human sociality. Non-student adult participants took part in five economic game experiments on different days. Disadvantageous inequity aversion (DIA) and advantageous inequity aversion (AIA) were calculated from behavioural responses using Bayesian estimation. We investigated the association between genetic polymorphisms in the oxytocin receptor (OXTR rs53576), arginine vasopressin receptor 1A (AVPR1A RS3) and opioid receptor mu 1 (OPRM1 rs1799971) and inequity aversion. Regarding AVPR1A RS3, participants with the SS genotype had higher AIA than those with the SL or LL genotypes, but no association was found for DIA. Moreover, we observed no aversion associations for OXTR rs53576 or OPRM1 rs1799971. The results suggest that AVPR1A plays an important role in aversion when one's own gain is greater than that of others. Our findings may provide a solid theoretical basis for future studies on the relationship between genetic polymorphisms and inequity aversion.

Distinct roles of the medial prefrontal cortex in advantageous and disadvantageous inequity aversion

Human beings have a strong preference for the fair distribution of resources in situations of both advantageous and disadvantageous inequity. Neuroimaging studies have shown that the process of advantageous and disadvantageous inequity aversion involves distinct brain regions. However, little is known about the causal roles of the dorsal medial prefrontal cortex (dmPFC) in these two types of inequity aversion. To clarify the roles of the dmPFC in both types of inequity aversion, 70 subjects were recruited and randomly assigned to two anodal transcranial direct current stimulation (tDCS) groups: tDCS over the dmPFC and tDCS over the primary visual cortex. Participants then completed a dictator game, which was used to measure the aversion to inequity. This study found that tDCS over the dmPFC decreased the aversion to disadvantageous inequity, but not that to advantageous inequity, and the treatment effect was modulated by equity cost. These results show that the dmPFC plays different roles in these two types of inequity aversion.

Coordinating socially responsible supply chain with fairness via simple wholesale price contract

This paper investigates how fairness of retailer may affect the channel coordination of a dyadic supply chain comprising one manufacturer and one retailer, when the manufacturer exhibits CSR. Previous studies have shown that a manufacturer can achieve channel coordination (i.e., maximum channel profit and utility) with a simple wholesale price contract when the retailer is sufficiently fair (i.e., his disadvantageous inequity aversion is above a certain threshold value). However, this paper has been designed to examine whether the fairness sufficiency of retailer can be influenced by manufacturer's CSR activity. To this end, we mathematically formulate the manufacturer-led Stackelberg game theoretic framework, where the manufacturer exhibits CSR and the retailer is fairness concerned. We consider equitable payoff as the fairness reference to formulate the utility function of fair retailer. The paper adopts this approach because it captures the supply chain members' contributions and depends on the best external option available to each member. To obtain boundaries for the subgame perfect Nash equilibrium, we apply Karush-Kuhn-Tucker (KKT) conditions for constrained optimization. The results show that when the manufacturer exhibits CSR, the fairness concerned retailer will choose the channel coordinating price if his disadvantageous inequity aversion is above a further lower threshold value. Thus, the manufacturer's CSR can be helpful in moderating the retailer's fairness sufficiency to achieve channel coordination via simple wholesale price contract. For practical implications, it suggests that a fairness concerned retailer's aversion to inequitable profit distribution can be moderated by the manufacturer's CSR/welfare activities.

I am entitled to it! Social power and context modulate disadvantageous inequity aversion

Previous research consistently indicated that social power influences one's fairness consideration. However, it is unclear how social power and context jointly affect inequity aversion and whether these processes would be manifested in brain activities. In this study, participants were randomly assigned into either high or low power condition and then took part in a modified ultimatum game (UG) as responders in both gain and loss contexts, with their event-related potentials (ERPs) recorded. Behavioral results showed that powerful participants were more likely to reject unfair offers in both contexts compared with powerless ones. In addition, powerful participants showed a more negative feedback-related negativity (FRN) loss-win difference wave (d-FRN) upon presentation of proposed offers compared with powerless participants only in the gain context. Interestingly, in a later time window, differences of P300 responses to proposed offers were modulated by social power in both gain and loss contexts. These results suggested that powerful people were more sensitive to fairness levels and FRN may manifest fairness consideration in a gain context, but not in a loss context. Meanwhile, P300 is sensitive to fairness considerations in both gain and loss contexts.

Choices behind the veil of ignorance in Formosan macaques.

An ongoing debate regarding the evolution of morality is whether other species show precursory moral behavior. The veil of ignorance (VOI) paradigm is often used to elicit human moral judgment but has never been tested in other primates. We study the division of resources behind the VOI in Formosan macaques. Monkeys choose the equal division more often when a conspecific is present than when it is absent, suggesting a degree of impartiality. To better understand this impartiality, we measure a monkey's reactions to two directions of inequity: one regarding inequity to its advantage and the other to its disadvantage. We find that disadvantageous inequity aversion correlates with the degree of impartiality behind the VOI. Therefore, seemingly impartial behavior could result from a primitive negative reaction to being disadvantaged. This suggests a mechanism to explain a tendency toward impartiality.

Willingness to produce disadvantageous outcomes in cooperative tasks is modulated by recent experience.

Cooperative behavior represents a situation in which individuals sometimes act in a way that produces a gain to another at a cost to themselves. This may be explained by a history of repeated interactions with others in which such behavior has resulted in reciprocal cooperation from others. Sometimes, even with reciprocal cooperation, gains and costs are unbalanced between partners. In this case, there is evidence that people may present an aversion to both disadvantageous and advantageous distributions of gains. In other words, they may act in such a way as to ensure an equal outcome among all group members. Aversion to inequity that benefits oneself (advantageous inequity (AI) aversion) may be more dependent on social and cultural cues than aversion to inequity that benefits others (disadvantageous inequity (DI) aversion). Using both between-subjects (Experiment 1) and within-subjects (Experiment 2) manipulations, the influence of recent experience with AI on participants' willingness to produce DI was explored within the context of a two-player card game. In initial game phases, the percentage of trials in which the participant experienced AI was manipulated. In subsequent game phases, participants had the opportunity to produce DI to themselves. The results from both experiments suggest that aversion to DI is reduced by recent experience with AI. This procedure allows social influences on DI to be tested, which may be important for providing a psychological explanation of cultural differences in aversion to DI.

Tipping pro-environmental norm diffusion at scale: opportunities and limitations

AbstractRapid and comprehensive social change is required to mitigate pressing environmental issues such as climate change. Social tipping interventions have been proposed as a policy tool for creating this kind of change. Social tipping means that a small minority committed to a target behaviour can create a self-reinforcing dynamic, which establishes the target behaviour as a social norm. The possibility of achieving the large-scale diffusion of pro-environmental norms and related behaviours with an intervention delimited in size and time is tempting. Yet, the canonical model of tipping, the coordination game, may evoke overly optimistic expectations regarding the potential of tipping, due to the underlying assumption of homogenous preferences. Relaxing this assumption, we devise a threshold model of tipping pro-environmental norm diffusion. The model suggests that depending on the distribution of social preferences in a population, and the individual cost of adopting a given pro-environmental behaviour, the same intervention can activate tipping, have little effect, or produce a backlash. Favourable to tip pro-environmental norms are widespread advantageous inequity aversion and low adoption costs. Adverse are widespread self-regarding preferences or disadvantageous inequity aversion, and high costs. We discuss the policy implications of these findings and suggest suitable intervention strategies for different contexts.

Explaining Individual Differences in Advantageous Inequity Aversion by Social-Affective Trait Dimensions and Family Environment

Humans are averse to both having less (i.e., disadvantageous inequity aversion [IA]) and having more than others (i.e., advantageous IA). However, the social-affective traits that drive individual differences in IA are not well understood. Here, by combining a modified dictator game and a computational model, we found in a sample of incarcerated adolescents (N = 67) that callous-unemotional traits were specifically associated with low advantageous but not disadvantageous IA. We replicated and extended the finding in a large-scale university student sample (N = 2,250) by adopting a dimensional approach to social-affective trait measures. We showed that advantageous IA was strongly and negatively associated with a trait dimension characterized by callousness and lack of social emotions (e.g., guilt and compassion). A supportive family environment negatively correlated with this trait dimension and positively with advantageous IA. These results identify a core set of social-affective dimensions specifically associated with advantageous IA.

Reciprocity With Unequal Payoffs: Cooperative and Uncooperative Interactions Affect Disadvantageous Inequity Aversion.

Cooperation among unrelated individuals can evolve through reciprocity. Reciprocal cooperation is the process in which lasting social interactions provide the opportunity to learn about others' behavior, and to further predict the outcome of future encounters. Lasting social interactions may also decrease aversion to unequal distribution of gains – when individuals accept inequity payoffs knowing about the possibility of future encounters. Thus, reciprocal cooperation and aversion to inequity can be complementary phenomena. The present study investigated the effects of cooperative and uncooperative interactions on participants' aversion to disadvantageous inequity. Participants played an experimental task in the presence of a confederate who acted as a second participant. In reality, the participant interacted with a computer programed to make cooperative and uncooperative choices. After interacting with a cooperative or uncooperative computer, participants chose between blue cards to produce larger gains to the computer and smaller for him/her or green cards to produce equal and smaller gains for both. Results confirmed our first hypothesis that uncooperative interactions would produce aversion to disadvantageous inequity. Lastly, half of the participants were informed that points received during the experiment could be later exchanged for money, and half were not. Results indicated that information about monetary outcomes did not affect aversion to inequity, contradicting our second hypothesis. We discuss these results in the light of theories of reciprocal cooperation, inequity aversion, and conformity.

An Improved Revenue Distribution Model for Logistics Service Supply Chain Considering Fairness Preference

Revenue distribution is an important issue in the operations of a logistics service supply chain (LSSC). The existing works on revenue distribution are mostly based on the assumption of rational economic people that are purely self-interested. However, people also have a fairness preference, which impacts people’s decision-making behavior or even the success operations of the LSSC. For a two-level supply chain consisting of logistics service integrator (LSI) and several functional logistics service providers (FLSP), this paper establishes an improved revenue distribution model considering FLSPs’ inequity aversion. Specifically, the BO model (abbreviation of a model proposed by Bolton and Ockenfels in 2000) is improved to describe the FLSPs’ inequity aversion, which is combined into the conventional revenue distribution model. The proposed model aims to maximize the revenue of logistics service supply chain and obtains the best revenue distribution ratio of each member under equilibrium. In the numerical cases, the impacts of inequity aversion and the number of members with inequity aversion on the revenue distribution are discussed, respectively. The results show that a higher degree of FLSP’s advantageous inequity aversion corresponds to a lower revenue distribution ratio; a higher degree of FLSP’s disadvantageous inequity aversion corresponds to a higher revenue distribution ratio. Increasing the number of FLSP members with inequity aversion results in a higher profit of LSI and lower total utility of FLSPs and the utility of the supply chain. The more FLSP members with inequity aversion there are, the higher the LSI’s profit is, and the lower the total utility of FLSPs and the utility of supply chain are. In addition, the revenue distribution ratio of the FLSP increases with its relative fairness revenue coefficient among FLSPs.

Investigating reactions of squirrel monkeys (Saimiri sciureus) towards unequal food distributions in a tray-pulling paradigm.

The fact that squirrel monkeys do not routinely cooperate in the wild has been proposed to explain their failure to show disadvantageous inequity aversion (i.e., negative reactions when receiving less than a partner) in an experimental exchange. Here we assessed whether the use of a tray-pulling paradigm, allowing for a larger variety of unequal testing situations, would bring additional insights into inequity aversion in this species. Squirrel monkeys were tested in pairs in which only the donor could pull a tray baited with food to within reach of itself and a recipient. Using pairs with different social relationships, we examined donors' frequencies of pulling both in the presence and absence of a recipient, as well as across three different food distributions: equal, qualitative inequity (higher-value reward for the recipient), and quantitative inequity (no food reward for the donor). Results showed that female donors pulled the tray less often in the quantitative inequity condition with an out-group female recipient than when alone. However, such discrimination was not observed when females were with female in-group and male out-group recipients. By contrast, male donors did not adjust their pull frequencies according to the recipient's presence or identity (female and male out-group recipients). These results point towards possible disadvantageous inequity aversion in female squirrel monkeys. However, alternative hypotheses such as increased arousal caused by out-group female recipients cannot be ruled out. We discuss the data in line with major theories of inequity aversion and cooperation in primates.

Decision making in green supply chains under the impact of the stochastic and multiple-variable dependent reference point

We examine the impact of the stochastic and multiple-variable dependent reference point, under which the members of a dyadic supply chain decide on a product’s green level, wholesale price, and order quantity to improve greening performance. The supply chain consists of a dominant manufacturer and a newsvendor retailer, both of whom may be inequity-averse. Their utility function involves disadvantageous inequity aversion when their trade partner’s profit is regarded as the reference point. Considering the availability of information on the distribution function of market demand, we build an analytical model to derive equilibrium results in three scenarios and then compare them with the results obtained in a normative retailer situation. We show that, in the absence of information on the distribution, for any given wholesale price, the retailer will choose to “under-order” as long as disadvantageous inequity occurs. If the environmental constraint is not binding, the risk-neutral manufacturer will keep the green level unchanged, whereas the inequity-averse manufacturer will reduce it. If the constraint is binding, the manufacturer will increase the green level in response to the reduction of order quantities. As a result, the equilibrium-expected profit of the manufacturer may decrease. The manufacturer can control the impact of the retailer’s inequity aversion by selecting an appropriate combination of wholesale price and green effort level.

Coordination of Time-Varying Price Supply Chain with Inequity-Averse Retailers

In order to coordinate time-varying price supply chain with inequity-averse retailers, this paper proposes a cooperative system decision model based on buy-back contract. The model concentratedly takes the market demand, manufacturers’ order response time, retailers’ inequity aversion, and time-varying price into consideration. Through sensitivity analysis of model parameters, the influence of inequity aversion characteristics of retailers on contract parameters is analyzed by a numerical example. The result reveals that the cooperative system based on buy-back contract can coordinate such supply chains. And it shows that when the retailer has disadvantageous inequity aversion, the buy-back contract is beneficial to the manufacturer; when the retailer has advantageous inequity aversion, the buy-back contract is beneficial to the retailer.

Interactive effects of OXTR and GAD1 on envy-associated behaviors and neural responses.

Inequity aversion (negative feelings induced by outcome differences between the self and other) plays a key role in human social behaviors. The neurotransmitters oxytocin and GABA have been implicated in neural responses to inequity. However, it remains poorly understood not only how individual genetic factors related to oxytocin and GABA affect the neural mechanisms behind inequity aversion, but also how these genes interact. To address these issues, we examined relationships between genotypes, behavioral decisions and brain activities during the ultimatum game. We identified interactive effects between the polymorphisms of the oxytocin receptor gene (OXTR) and glutamate decarboxylase 1 gene for GABA synthesis (GAD1) on envy aversion (i.e., disadvantageous inequity aversion) and on envy-induced activity in the dorsal ACC (dACC). Thus, our integrated approach suggested interactive genetic effects between OXTR and GAD1 on envy aversion and the underlying neural substrates.

Distinguishing neural correlates of context-dependent advantageous- and disadvantageous-inequity aversion

Humans can integrate social contextual information into decision-making processes to adjust their responses toward inequity. This context dependency emerges when individuals receive more (i.e., advantageous inequity) or less (i.e., disadvantageous inequity) than others. However, it is not clear whether context-dependent processing of advantageous and disadvantageous inequity involves differential neurocognitive mechanisms. Here, we used fMRI to address this question by combining an interactive game that modulates social contexts (e.g., interpersonal guilt) with computational models that enable us to characterize individual weights on inequity aversion. In each round, the participant played a dot estimation task with an anonymous coplayer. The coplayer would receive pain stimulation with 50% probability when either of them responded incorrectly. At the end of each round, the participant completed a variant of dictator game, which determined payoffs for him/herself and the coplayer. Computational modeling demonstrated the context dependency of inequity aversion: when causing pain to the coplayer (i.e., guilt context), participants cared more about the advantageous inequity and became more tolerant of the disadvantageous inequity, compared with other conditions. Consistently, neuroimaging results suggested the two types of inequity were associated with differential neurocognitive substrates. While the context-dependent processing of advantageous inequity was associated with social- and mentalizing-related processes, involving left anterior insula, right dorsolateral prefrontal cortex, and dorsomedial prefrontal cortex, the context-dependent processing of disadvantageous inequity was primarily associated with emotion- and conflict-related processes, involving left posterior insula, right amygdala, and dorsal anterior cingulate cortex. These results extend our understanding of decision-making processes related to inequity aversion.

Advantageous Inequity Aversion Does Not Always Exist: The Role of Determining Allocations Modulates Preferences for Advantageous Inequity.

Previous studies have shown that people would like to sacrifice benefits to themselves in order to avoid inequitable outcomes, not only when they receive less than others (disadvantageous inequity aversion) but also when they receive more (advantageous inequity aversion). This feature is captured by the theory of inequity aversion. The present study was inspired by what appears to be asymmetry in the research paradigm toward advantageous inequity aversion. Specifically, studies that supported the existence of advantageous inequity aversion always relied on the paradigm in which participants can determine allocations. Thus, it is interesting to know what would occur if participants could not determine allocations or simply passed judgment on predetermined allocations. To address this, a behavioral experiment (N = 118) and a skin conductance response (SCR) experiment (N = 29) were adopted to compare participants' preferences for advantageous inequity directly when allocations were determined and when allocations were predetermined in an allocating task. In the determined condition, participants could divide by themselves a sum of money between themselves and a matched person, whereas in the predetermined condition, they could simply indicate their satisfaction with an equivalent program-generated allocation. It was found that, compared with those in the determined condition, participants in the predetermined condition behaved as if they liked the advantageous inequity and equity to the same degree (Experiment One) and that the SCRs elicited by advantageous inequity had no differences from those elicited by equity, suggesting that participants did not feel negatively toward advantageous inequity in this situation (Experiment Two). The present study provided mutual corroboration (behavioral and electrophysiological data) to document that advantageous inequity aversion may differ as a function of the individual's role in determining allocations, and it would disappear if individual cannot determine allocations.

Children’s collaboration induces fairness rather than generosity

Children across diverse societies reject resource allocations that place them at a disadvantage (disadvantageous inequity aversion; DI). In certain societies, older children also reject advantageous allocations (advantageous inequity aversion; AI). Other work demonstrates that after collaboration, children reduce inequity by sharing. However, it is unknown whether collaboration leads to greater sharing because it encourages prosociality (Generosity Hypothesis) or because collaboration elicits stronger equitable tendencies (Equity Hypothesis). Here we use measures of inequity aversion that can disambiguate between these hypotheses. We tested 7- to 13-year-old children from rural India, a population that has shown DI but not AI, and 4- to 10-year-old children from rural Canada, a population that shows both AI and DI. Pairs of children worked either collaboratively or in parallel obtaining candy that was then used in a test of DI and AI. Results showed that in both societies collaboration did not encourage children to accept DI offers, providing evidence against the Generosity Hypothesis. However, in both societies older children demonstrated AI after collaboration but not after parallel work. For children in India AI emerged in ages where it had not been previously observed and children in Canada showed AI during early middle childhood. This suggests that collaboration can induce a willingness to sacrifice an advantage to achieve equity, consistent with the Equity Hypothesis.

It’s not fair: Folk intuitions about disadvantageous and advantageous inequity aversion

AbstractPeople often object to inequity; they react negatively to receiving less than others (disadvantageous inequity aversion), and more than others (advantageous inequity aversion). Here we study people’s folk intuitions about inequity aversion: what do people infer about others’ fairness concerns, when they observe their reactions to disadvantageous or advantageous inequity? We hypothesized that, people would not intuitively regard disadvantageous inequity aversion by itself as being rooted in fairness, but they would regard advantageous inequity aversion by itself as being rooted in fairness. In four studies, we used vignettes describing inequity aversion of a made up alien species to assess people’s folk intuitions about inequity aversion. The studies supported our main hypothesis that disadvantageous inequity aversion, without advantageous inequity aversion, does not fit people’s folk conception of fairness. Instead, participants reported it to be rooted in envy. According to these results, the claim that disadvantageous inequity aversion reveals a concern with fairness, does not readily accord with people’s intuitions. We connect these findings to other pieces of evidence in the literatures of behavioral economics, developmental psychology, and social psychology, indicating that lay people’s intuitions may be on the mark in this case. Specifically, unlike advantageous inequity aversion, disadvantageous inequity aversion need not be rooted in a sense of fairness.