How Exposure to Markets Can Favor Inequity-Averse Preferences
University of Zurich - Department of Economics
September 18, 2008
This paper shows how non-individualistic preferences can be individual fitness maximizing in market-integrated societies. In the model, individuals share an endowment, which is used for consumption and/or purchase of goods on the external market. We show that inequity aversion about endowment distribution can be an optimal response to merchants' price discrimination. Then, assuming that increased consumption means increased individual fitness, we argue that evolutionary selection can favor inequity-averse preferences. We also argue that our model can explain an empirical finding of Henrich et al. (2004) about the positive effect of a society's exposure to markets on its members' sociality.
Number of Pages in PDF File: 21
Keywords: Inequity aversion, endogenous preferences, preference evolution, market exposure, cross-societal differences
JEL Classification: A10, C73, D63
Date posted: March 26, 2008 ; Last revised: June 8, 2010