Fehr Schmidt Inequality

Question 1

What does the Fehr-Schmidt model assume?

Answer 1

People dislike inequality: α = dislike being worse off (envy), β = dislike being better off (guilt)

Question 2

Utility function in Fehr-Schmidt model?

Answer 2

U_i(x) = x_i - α_i ∑ max(x_j - x_i, 0) - β_i ∑ max(x_i - x_j, 0)

Question 3

Games where Fehr-Schmidt works well?

Answer 3

Ultimatum: explains rejections of unfair offers (high α); Dictator: explains giving due to β; Public Goods: explains cooperation when inequality matters.

Question 4

Key supporting evidence for Fehr-Schmidt?

Answer 4

Fehr & Gächter (2000) — punishment improves cooperation in VCM; fairness motives at play.

Question 5

What did Blanco et al. (2011) find?

Answer 5

α and β parameters vary across games — Fehr-Schmidt doesn’t generalise well across contexts.

Question 6

What does Nikiforakis (2008) show about punishment?

Answer 6

Punishment can provoke retaliation — not always fairness-based.

Question 7

What does Herrmann et al. (2008) show?

Answer 7

In some cultures, people punish those who cooperate (antisocial punishment) — contradicts Fehr-Schmidt.

Question 8

Alternative models to Fehr-Schmidt?

Answer 8

Charness-Rabin — includes intentions and efficiency; ERC — focuses on reciprocity and relative standing.