Pennies From Heaven: Overestimating the Satisfaction of Overpaid Recipients

Overpayments are common in money allocation and trading, creating advantageous inequity for recipients. The literature on behavioral economics, developmental psychology, and social psychology shows that recipients show aversion to advantageous inequity, suggesting that they are also averse to overpayment. However, can observers accurately predict how much recipients are averse to overpayments? Drawing on theories of advantageous inequity, psychological distance, and accessibility, we show that observers overestimate the satisfaction of those who are overpaid (Study 1) and underestimate the amount of overpayment that recipients return to the allocator (Study 2). This misprediction occurs because observers focus more on benefit acquisition and less on equity violations than do recipients (Study 3). Encouraging observers to take the recipient perspective reduces this overestimation (Study 4). This overestimation is also mitigated when recipients’ overpayments do not cause underpayments to others in similar positions (Study 5) and when recipients receive more payments than others due to their greater contributions (Study 6). The current research contributes to the literature on advantageous-inequity aversion, equity perception, and misprediction. It also has implications for policymakers, managers, and marketers.