Matthew Rabin's model of
fairness is based on Geanakoplos, Pearce and Stacchetti's (1989) notion of "psychological game",
in which payoffs depend on
actions and on beliefs about actions. The paper describes how Rabin's model shows how
fairness expectations lead to different results than standard theory and demonstrates some general implications of fairness on game theory and economics. This paper contains a short description of Rabin's model, gives some examples, propositions, proofs and critique.