Moral reference points: theory and experimental evidence

Abstract

The literature exploring other-regarding behavior has uncovered interesting phenomena, yet the extent to which the data are consistent with theory is not well understood. We explain how recent work challenges conventional preference theory and social preferences models but also show that a small part of this research poses a more fundamental challenge of general rational choice theory. We restate classical principles of rational choice (Sen AK Rev Econ Stud 38: 307-317, 1971, Sen AK In: K. J. Arrow and M. Intriligator (eds) Handbook of Mathematical Economics. Amsterdam: North-Holland, 1986) to incorporate moral reference points (minimal expectation payoffs and endowments) and postulate that choices exhibit monotonicity to the reference points: “moral monotonicity.” Data from a new experiment tests rational choice theory and familiar reference point models from prior literature against moral monotonicity (MM) theory. We also apply our MM theory to data from several experiments in the previous literature and find general support for the new theory, thus exhibiting the range of fruitful applicability of MM theory.