Social Preferences and Deliberately Stochastic Behavior

Abstract

We propose a tractable stochastic choice model to identify motivations for prosocial behavior. We employ an additively perturbed utility model consisting of the sum of expected utility and a nonlinear cost function, where the utility function is purely selfish while the cost function depends on social preferences. We study stochastic choice patterns to distinguish between stochastic inequity-averse behavior and stochastic shame-mitigating or impurely altruistic behavior. Moreover, we discuss how our model can complement recent experimental evidence of choices between lotteries of allocations. Finally, we provide an axiomatic characterization of the model.

Keywords: Preference for Randomization; Perturbed Utility; Personal Norms; Impure Altruism; Efficiency; Fairness.

JEL Classification: D63; D64; D81.