BazermanMoore

CHAPTER
SEVEN
Fairness and Ethics in
Decision Making
You are graduating from a good MBA program. Following your discussions with a number
of firms, one of your preferred companies makes you an offer of $90,000 a year, stressing
that the amount is not negotiable. You like the people. You like the job. You like the location.
However, you find out that the same company is offering $95,000 to some graduating
MBAs from similar-quality schools. Will you accept the offer?
Hurricane Katrina hits southern Louisiana, leaving many people homeless. For many commodities
such as building materials, demand is up and supply is down. This is a condition
that leads economists to predict an increase in prices. In fact, in the aftermath of the hurricane,
a small building-supply company more than doubles its prices on many items that are
in high demand, such as lumber. Are the price increases ethical? Are they rational?
In the first story, many of our students are very bothered by the difference between
their salary and the salary of others, even if they learn that the difference does not predict
how the company will treat them in the future. In the second story, most people
believe that it is not ethical for the company to raise its prices. Since many customers
will react negatively to the perceived unfairness of the price increase, it may not be
even be rational for retailers to raise their prices in response to temporary increases in
demand, regardless of what economists tell us ought to happen in efficient markets.
Issues of fairness and ethics are essential to a complete understanding of decision
making. The first half of this chapter focuses on how individuals perceive the fairness of
the actions of others. As we will discuss, people care passionately about fairness despite
the fact that economic theory dismisses such concerns as superfluous. The second half
of the chapter focuses on the ethicality of our own judgments by considering the ways
in which our ethical judgments can be biased, usually in self-serving ways, and often
without our awareness.
PERCEPTIONS OF FAIRNESS
Research on fairness has focused on either the distribution of scarce resources (Messick,
1991) or the fairness of the distribution procedures (Lind & Tyler, 1988). Most
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