Social Preferences Under Risk : Why do Opportunity Concerns Matter?

We propose and axiomatize a decision model of social preferences under risk that considers decision makers for whom generous behavior is driven largely by an egoistical desire to perceive themselves as prosocial. Our model considers a setup with a decision maker (DM) and one other individual. It highlights how, the presence of risk, may allow the DM to exploit the distinction between the other individual's ex post outcome and his ex ante opportunity in a self-serving way and perceive herself as more prosocial than what is warranted by his actual outcome under her choice. In turn, this allows her to behave more self-interestedly in the presence of risk. In that respect, our approach, in particular our position on why opportunity concerns matter, contrasts with fairness-based models (e.g., Fudenberg and Levine, 2012; Saito, 2013) that posit that individuals have a deep aversion to inequality of both outcomes and opportunities. We show that our model provides a unified basis for rationalizing a wide array of the existing experimental evidence on generous behavior under risk, including evidence that is inconsistent with fairness-based models