2005 Volume 56 Issue 1 Pages 182-199
The purpose of this paper is to examine whether ethical norms can realize Pareto-efficient states in any two-person interactions. I define ethical norms as shared evaluations of one's own and the other's objective payoffs. Norms include altruism, egalitarianism, and egoism, etc.
I assume that each actor chooses an action based on “the evaluation matrix” (subjective interpretations of the situation). An ethical norm transforms the original objective payoffs into a subjective evaluation. We call this frame “the two-level game modeling.” Pure Nash equilibria on the evaluation matrix may be realized as constant states. Therefore, the research question here is to investigate whether an ethical norm transforms Pareto-efficient actions on any games into pure Nash equilibria on the evaluation matrix.
I show that (i) such norms do exist and they satisfy “impartiality” and “altruism, ” (ii) such norms are linear combinations of “maximax” and “maximin, ” and (iii) norms with overestimating equality are excluded.