Maximizing Profit vs. Minimizing Disadvantageous Inequality: Allocations Within and Between State and Local Jurisdictions

Stephen Garcia, Ford School of Public Policy

Professor Garcia received CLOSUP funding for this project to investigate evaluations of preferred payoff allocations depending on the similarity or differences in social categorization among recipients.

Abstract:
Research on the separate versus joint evaluation of payoff allocations (e.g., Bazerman, Loewenstein, & White, 1992) has found that individuals prefer an equitable allocation between themselves and another person (e.g. self - $500 / other - $500) to an alternative allocation where they receive a higher absolute but disadvantageously unequal outcome (e.g. self - $600 / other - $800) when these alternatives are evaluated separately. On the other hand, when evaluating these alternatives jointly individuals show the opposite pattern, preferring profit maximization. I argue, however, that the more rational preference for profit maximization in joint evaluation is limited to those circumstances where the payoff recipients share the same social category (i.e., State of Michigan residents). When social category membership differs between recipients (i.e., State of Michigan residents vs State of Ohio residents), individuals no longer prefer profit maximization under joint evaluation. Experiments will be conducted to support the hypothesis that overlaying social categories, operationalized as state and local jurisdictions, onto payoff recipients will shift preferences from profit maximization to equitable allocation, even under joint evaluation. Implications for allocations across state and local lines will be discussed.