Social Utility, Inequality Aversion, and Rank-Status

Several distinct strategies or motivations have been proposed in order to characterise the ways in which people compare themselves to others, and how such information influences the decisions they make. Among the most studied type of social preference is inequality aversion, which describes a preference for equal outcomes for all group members, usually with a particular dislike for doing worse than others. A second, rank-status, describes the tendency to focus on the ordinal position (rather than the magnitude) of outcomes and the desire to rank higher than others in outcome standings. Though these competing forms of social preference describe very different psychological processes, these theories do—under certain circumstances—generate identical predictions. To accurately assess how people use information about others in decision-making, these theories must be deliberately, directly, and carefully disentangled. This paper presents two studies in which we competitively test these models of social preference as well as self-interest. We construct social utility curves from a series of satisfaction ratings of allocations for the self and one peer (Study 1) and two peer (Study 2) reference points. In both studies we find some heterogeneity expressed in preferences regarding distribution of several different attributes. Overall, a consistent plurality of participants are best fit by the Fehr and Schmidt inequality aversion model compared to mean reference fairness models and rank-based preference models; though a lesser proportion than found elsewhere in the literature (i.e.,without comparison against competing models). Surprisingly, this preference is also prominent in considerations of vacation time, a leisure attribute assumed to be unaffected by social judgement. The results highlight both discrete and continuous individual differences in the form of social preference.