Ashamed to be selfish

Abstract

We study a decision maker (DM) who has preferences over choice problems, which are sets of payoff allocations between herself and a passive recipient. An example of such a set is the collection of possible allocations in the classic dicta- tor game. The choice of an allocation from the set is observed by the recipient, whereas the choice of the set itself is not. Behaving selfishly under observation, in the sense of not choosing the normatively best allocation, inflicts shame on the DM. We derive a representation that identifies the DM’s private ranking of alloca- tions, her subjective norm, and her shame. The normatively best allocation can be further characterized as the Nash solution of a bargaining game induced by the second-stage choice problem