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We develop a formal theory of decency. People are fundamentally selfish, but feel guilty if they fail to promote socially valuable outcomes. In our structural formulation of social values, society endorses efficiency and equality. Society also condemns ill-gotten gains, that is, private gains that are obtained by violating social values. We use a past experiment to estimate the model’s (culture-specific) parameters. In addition to behaviors that are also captured by related models other-regarding preferences, the model rationalizes intention-based negative reciprocity and betrayal aversion.
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