Ashamed to Be Selfish
31 Pages Posted: 4 Nov 2010
Date Written: September 20, 2010
We study a decision maker (DM) who has preferences over sets of payoff-allocations between herself and a passive recipient, which represent second-stage choice problems. The recipient is only aware of second-stage choice of an allocation. Not choosing the normatively best allocation in the second stage inflicts shame on DM. We derive a representation that identifies DM's private ranking of allocations, her subjective norm, and shame. The normatively best allocation can be further characterized as the Nash solution of a bargaining game induced by the second-stage choice problem.
JEL Classification: C78, D63, D64, D80, D81
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