The Price of Equality: Suboptimal Resource Allocations Across Social Categories

26 Pages Posted: 31 Jul 2009 Last revised: 29 Sep 2011

Stephen M. Garcia

University of Michigan

Max H. Bazerman

Harvard Business School - Negotiations, Organizations and Markets Unit

Shirli Kopelman

University of Michigan, Stephen M. Ross School of Business

Avishalom Tor

Notre Dame Law School; University of Haifa - Faculty of Law

Dale T. Miller

Stanford Graduate School of Business

Date Written: July 31, 2009

Abstract

This paper explores the influence of social categories on the perceived trade-off between relatively bad but equal distribution of resources between two parties and profit maximizing, yet asymmetric payoffs. Study 1 and 2 showed that people prefer to maximize profits when interacting within their social category, but chose suboptimal individual and joint profits when interacting across social categories. Study 3 demonstrated that outside observers, who were not members of the focal social categories, also were less likely to maximize profits when resources were distributed across social category lines. Study 4 showed that the transaction utility of maximizing profits required greater compensation when resources were distributed across, in contrast to within social categories. We discuss the ethical implications of these decision making biases in the context of organizations.

Keywords: Profit Maximization, Choice, Decision Making, Social Categories, Transaction Utility, Ethical Dilemmas

Suggested Citation

Garcia, Stephen M. and Bazerman, Max H. and Kopelman, Shirli and Tor, Avishalom and Miller, Dale T., The Price of Equality: Suboptimal Resource Allocations Across Social Categories (July 31, 2009). Harvard PON Working Paper No. 1442078. Available at SSRN: https://ssrn.com/abstract=1442078 or http://dx.doi.org/10.2139/ssrn.1442078

Stephen M. Garcia (Contact Author)

University of Michigan ( email )

741 Dennison Hall
Ann Arbor, MI 48109
United States
734-615-2561 (Phone)

HOME PAGE: http://www.sitemaker.umich.edu/stephen.garcia

Max H. Bazerman

Harvard Business School - Negotiations, Organizations and Markets Unit ( email )

Soldiers Field
Boston, MA 02163
United States
617-495-6429 (Phone)
617-496-4191 (Fax)

HOME PAGE: http://www.people.hbs.edu/mbazerman

Shirli Kopelman

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

HOME PAGE: http://www.shirlikopelman.com

Avishalom Tor

Notre Dame Law School ( email )

P.O. Box 780
Notre Dame, IN 46556-0780
United States

University of Haifa - Faculty of Law ( email )

Mount Carmel
Haifa, IN IN 31905
Israel

Dale T. Miller

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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