Negotiating Inequality: When People Prefer Equal Outcomes to More Money in a Negotiation

Abstract: Non-distributive aspects of negotiations provide opportunities for expanding total value. Often, opportunities exist for Pareto improvements to tentative agreements that would enrich one party more than another. Such proposals, if agreed upon, would maximize total welfare but typically come at the expense of equality. On neoclassical-economic views, people should accept such proposals. Nevertheless, across four negotiation studies we show that people often reject Pareto improvements that would increase inequality. Contrary to research documenting a desire for moralistic punishment, we show that the observed effect is driven by an increased weight given to the relational outcomes in the presence of unequal offers. We further show that this effect becomes more pronounced when considering future negotiations, thereby exaggerating the economic costs of this preference for equality of negotiated outcomes. In rejecting such Pareto improvements, people are turning down free money in order to avoid inequality.

Keywords: Negotiation, inequality, costly punishment, relational outcomes