[1] The social sciences that study inequity aversion include sociology, economics, psychology, anthropology, and ethology.
Researchers on inequity aversion aim to explain behaviors that are not purely driven by self-interests but fairness considerations.
[5] A more recent definition of inequity aversion (resistance to inequitable outcomes) was developed in 1999 by Fehr and Schmidt.
Gary E Bolton and Axel Ockenfels provided a more general model called ERC (equity, reciprocity, and competition) in 2000.
In this model, all payoffs are monetary and nonnegative and players aim to maximize the expected value of motivation function.
Fehr and Schmidt showed that disadvantageous inequity aversion manifests itself in humans as the "willingness to sacrifice potential gain to block another individual from receiving a superior reward".
Without inequity aversion's rejection of injustice, stable cooperation would be harder to maintain (for instance, there would be more opportunities for successful free riders).
[8] Thus, individuals who free ride on the contributions of fellow group members are likely to be punished because they earn more, creating a decentralized incentive for the maintenance of cooperation.
The last such experiment was identical to the former, where 40% were turned into a gang of robbers, with one catch: the two players were forced to earn the money by stuffing envelopes.
In 2011, Ert, Erev and Roth[9] ran a model prediction competition on two datasets, each of which included 120 two-player games.
[11] Surveys of employee opinions within firms have shown modern labor economists that inequity aversion is very important to them.
According to Bewley (1999), the main reason that managers create formal pay structures is so that the inter-employee comparison is seen to be "fair", which they considered "key" for morale and job performance.
[12] It is natural to think of inequity aversion leading to greater solidarity within the labor pool, to the benefit of the average employee.
However, a 2008 paper by Pedro Rey-Biel shows that this assumption can be subverted, and that an employer can use inequity aversion to get higher performance for less pay than would be possible otherwise.
Binmore and Shaked also point out that Fehr and Schmidt (1999) pick a distribution of alpha and beta without conducting a formal estimation.
The perfect correlation between the alpha and beta parameters in Fehr and Schmidt (1999) is an assumption made in the appendix of their paper that is not justified by the data that they provide.
Some authors have found beta larger than alpha, which contradicts a central assumption made by Fehr and Schmidt (1999).
Fehr and Schmidt proposed that additional research on the inequity aversion should emphasize explicitly formalizing the role of intentions and conducting more thorough testing of the theory against alternative hypotheses.
An experiment on capuchin monkeys (Brosnan, S and de Waal, F) showed that the subjects would prefer receiving nothing to receiving a reward awarded inequitably in favor of a second monkey, and appeared to target their anger at the researchers responsible for the inequitable distribution of food.
[22] Anthropologists suggest that this research indicates a biological and evolutionary sense of social "fair play" in primates, though others believe that this is learned behavior or explained by other mechanisms.
The latest study shows that chimpanzees play the Ultimatum Game in the same way as children, preferring equitable outcomes.
[25] Recent studies suggest that animals in the canidae family also recognize a basic level of fairness, stemming from living in cooperative societies.
[26] Animal cognition studies in other biological orders have not found similar importance on relative "equity" and "justice" as opposed to absolute utility.