Profit Maximization Versus Disadvantageous Inequality: The Impact of Self-Categorization

Garcia, Stephen M.; Tor, Avishalom; Bazerman, Max H.; Miller, Dale T.

doi:10.2139/ssrn.661444

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Profit Maximization Versus Disadvantageous Inequality: The Impact of Self-Categorization

29 Pages Posted: 16 Feb 2005

See all articles by Stephen M. Garcia

Max H. Bazerman

Harvard Business School - Negotiations, Organizations and Markets Unit

Dale T. Miller

Stanford Graduate School of Business

Date Written: December 2004

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. This paper argues, however, that the more rational preference for profit maximization in joint evaluation is limited to those circumstances where the payoff recipients share a social identity. When social identity differs between recipients, individuals no longer prefer profit maximization under joint evaluation. Four experiments support the hypothesis that overlaying social categories onto payoff recipients shifts preferences from profit maximization to equitable allocation, even under joint evaluation. Implications for organizations, which are inevitably rife with different social identities, are discussed.

Keywords: Preference Reversals, Decision Making, Social Categories

Suggested Citation: Suggested Citation

Garcia, Stephen M. and Tor, Avishalom and Bazerman, Max H. and Miller, Dale T., Profit Maximization Versus Disadvantageous Inequality: The Impact of Self-Categorization (December 2004). Available at SSRN: https://ssrn.com/abstract=661444 or http://dx.doi.org/10.2139/ssrn.661444