Social preferences and expected utility

Abstract It is well known that ex-ante social preferences and expected utility are not always compatible. In this note, we introduce a novel framework that naturally separates social preferences from selfish preferences to answer the following question: What specific forms of social preferences can be accommodated within the expected utility paradigm? In a departure from existing frameworks, our framework shows that ex-ante social preferences can be reconciled with expected utility at the level of game utility, provided the corresponding non-expected utility component is absorbed by selfish utility. We also show that when a player’s preferences in both the game (against another player) and the associated decision problem (against Nature) conform to expected utility axioms, the permissible range of social preferences becomes notably restricted. Only under this stronger joint requirement do we reaffirm the existing literature’s key insight regarding the incompatibility of ex-ante inequality aversion with expected utility.