​Working Papers
Stochastic Expected Inequity-Averse Choice (with Keisuke Yoshihara)
Abstract.
This study provides an axiomatic foundation for stochastic inequity-averse choice behavior, capturing ex-post fairness and ex-ante fairness. We focus on Saito [Social Preferences under Risk: Equality of Opportunity versus Equality of Outcome, American Economic Review, 103 (7): 3084-3101]. By studying deliberate randomization, we characterize the stochastic choice behavior stemming from Saito (2013). We find that the violations of Regularity occur, and that ex-ante fairness can lead to preference reversal phenomena.
Highlights.
  • We develop a stochastic choice model that stems from Saito [Social Preferences under Risk: Equality of Opportunity versus Equality of Outcome, American Economic Review, 103 (7): 3084-3101], a convex combination of ex-ante fairness and ex-post fairness.
  • We show that the stochastic choice model deviates from Regularity, one of the most well-known properties in stochastic choice.
  • We find that the model can lead to preference reversals due to ex-ante fairness.
Link
The file is linked to Google drive.
Idea & Approach.
Purpose. 
  • We study deliberately stochastic choice behavior stemming from Saito (2013).
Methodology. 
  • axiomatic approach - preferences over lotteries & stochastic choice function
Findings. 
  • Stochastic Expected Inequity-Averse Choice is not consistent with Regularity.
  • Violations of WARP can occur.
Implications. 
  • Stochastic EIA does not nest Additive Perturbed Inequity-Averse Utility (APU(IA)).
Stochastic Choice and Social Preferences: Inequity Aversion versus Shame Aversion (with Keisuke Yoshihara)
Abstract.
In this paper, we propose a theory to identify the motivations behind altruistic or prosocial behavior. We focus on inequity aversion and shame aversion as social image concerns. To study these, we characterize two additively perturbed utility models, that is, the sum of expected utility and a non-linear cost function. First, we examine how to distinguish between stochastic inequity-averse behavior and stochastic shame-averse behavior. Next, we show that additively perturbed inequity-averse utility captures the general class of inequity-averse preferences, including ex-ante and ex-post fairness. Finally, we consider the relationship between our models and random utility, one of the most common stochastic choice models.
Idea & Approach.
Purpose. 
  • We aim to distinguish stochastic inequity-averse behavior from stochastic shame-averse behavior.
    1. stochastic inequity-averse behavior: deliberate randomization can occur due to ex-post fairness or ex-ante fairness. 
    2. stochastic shame-averse behavior: deliberate randomization can occur due to the aversion to revealing selfishness.
Methodology. 
  • axiomatic approach - stochastic choice function
  • additive perturbed utility (APU)
Findings. 
  • The two models are axiomatized in the class of APU; (i) additive perturbed inequity-averse behavior (APU(IA)), & (ii) additive perturbed shame-averse utility (APU(SA)).
  • In APU(IA), menu-dependent cost functions on randomization are characterized. 
Implications. 
  • We provide various examples of the difference b/w APU(IA) & APU(SA).
Link.
The file is linked to Google drive.
Image-Conscious Behavior and Cooperation Rates
Abstract.
This paper theoretically studies how the cooperation rate in the one-shot Prisoner's Dilemma (PD) is related to image-conscious preferences. By showing the existence of the Nash equilibrium with image-conscious preferences, we study how the payoff structure of the PD affects cooperation considering image-conscious preferences. We state the conditions on image-conscious preferences that are consistent with the experimental evidence of the one-shot PD. Moreover, we discuss the relationship between image-conscious preferences and intrinsic reciprocity.
Idea & Approach.
Purpose. 
  • The objective of this paper is to understand the effect of social image concerns in the one-shot PD.
  • ​We study how the payoff structure of the PD affects cooperation considering image-conscious preferences.
Methodology. 
  • Theory - Equilibrium Analysis
  • Apply Saito [Saito, K. (2015): ``Impure Altruism and Impure Selfishness,'' Journal of Economic Theory, 158, 336-370.] into the one-shot PD.
Findings. 
  • The cooperation rate increases if social pressures are high; players feel shame for acting selfishly and proud of acting altruistically. In this case, players share a social norm and feel shame by deviating from the norm or feel pride by conforming to the norm.
  • We state the conditions on image-conscious preferences that are consistent with the experimental evidence of Ahn et al.  [Ahn, T. K., Ostrom, E., Schmidt, D., Shupp, R., and Walker, J. (2001): ``Cooperation in PD Fames: Fear, Greed, and History of Play,'' Public Choice, 106(1-2), 137-155.] and Charness et al. [Charness, G., Rigotti, L., and Rustichini, A. (2016): ``Social Surplus Determines Cooperation Rates in the One-Shot Prisoner's Dilemma,'' Games and Economic Behavior, 100, 113-124.].​​
Implications. 
  • Image-conscious preferences can provide a unified framework of social preferences. We study how image-conscious preferences are related to intrinsic reciprocity. 
Link.
The file is linked to Google drive.