Maximizing Joint Gains: Transaction Utility within and between Groups

21 Pages Posted: 8 Jun 2005

See all articles by Stephen M. Garcia

Stephen M. Garcia

University of Michigan

Dale T. Miller

Stanford Graduate School of Business

Max H. Bazerman

Harvard Business School - Negotiations, Organizations and Markets Unit

Date Written: June 2005

Abstract

In a choice between equal payoffs (e.g., self gets $500/other person gets $500) and more lucrative but disadvantageously unequal payoffs (e.g., self gets $600/other person gets $800), individuals willingly trade disadvantageous inequality for extra profit (e.g., Blount and Bazerman, 1996), choosing the more lucrative but disadvantageously unequal payoff. The present analysis, however, explores how the transaction utility (Thaler, 1985; 1999), the perceived value of such "deals," depends on whether allocation recipients come from the same social category (e.g., same gender) or different ones (e.g., females versus males). Studies 1-3 test the prediction that individuals tend to trade disadvantageous inequality for greater profit when allocations recipients share the same social category (e.g., within groups), but do not when recipients belong to different social categories (e.g., between groups). Study 4 shows that the transaction utility of disadvantageous inequality requires a greater premium between groups than it does within them. Implications for maximizing joint gains are discussed.

Keywords: Choice, Decision Making, Social Categories, Transaction Utility

Suggested Citation

Garcia, Stephen M. and Miller, Dale T. and Bazerman, Max H., Maximizing Joint Gains: Transaction Utility within and between Groups (June 2005). Harvard PON Working Paper No. 05-113; HBS Working Paper No. 05-082. Available at SSRN: https://ssrn.com/abstract=738669 or http://dx.doi.org/10.2139/ssrn.738669

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

Dale T. Miller

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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

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