A preference foundation for Fehr and Schmidt's model of inequity aversion

@article{Rohde2010APF,
  title={A preference foundation for Fehr and Schmidt's model of inequity aversion},
  author={Kirsten I. M. Rohde},
  journal={Social Choice and Welfare},
  year={2010},
  volume={34},
  pages={537-547}
}
Fehr and Schmidt (1999) introduced an influential utility function for individuals in interpersonal contexts that captures self-centered inequity aversion. The power of this utility function lies in its good balance between parsimony and fit. This paper provides a preference foundation for exactly the model of Fehr and Schmidt (FS), so that the preference conditions satisfy exactly FS’s balance between parsimony and fit. Remarkably, FS is a special case of Schmeidler’s (1986, 1989) rank… CONTINUE READING
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