Children are notoriously inequity averse: they tend to respond negatively when someone else receives more than them for the same work. Here we suggest that children's inequity aversion is more nuanced than it might appear at first glance. Specifically, we argue that children's negative reaction to inequity is powerfully shaped by a simple factor: whether or not they have a sense of agency in creating the outcomes in question. We hypothesize that a sense of agency, or control over the resource allocation, reduces children's inequity aversion and increases their satisfaction with another child receiving more than them. In two experiments (N = 417) utilizing a within-subject design, children aged 4 to 10 years old were asked to rate their satisfaction with an allocation in which another child received more than them. In one condition they were the ones choosing the allocation (“agency condition”), whereas in another condition they could not affect the allocation (“no-agency condition”). In line with our hypothesis, children reported being more satisfied with disadvantageous inequity when they had agency than when they did not (Experiment 1). They were also more satisfied with a disadvantageous allocation when they had agency than when the same allocation was created using an impartial lottery (Experiment 2). The agency effect did not depend on age. Taken together, our findings suggest a degree of sophistication in children's reactions to inequity and provide a practical allocation tool that can be used by parents and educators.

Equity, or the idea that one should be compensated according to one’s respective contribution, is a fundamental principle for resource allocation. People tend to endorse equity in a wide range of contexts, from interpersonal relationships to public policy. However, at times, equity might come at the expense of efficiency. What do people do when they must waste resources to maintain equity? In this chapter, we adopt a behavioral perspective on such equity–efficiency trade-offs, reviewing the relevant findings from the social psychology, judgment and decision-making and behavioral economics literature. We show that whereas allocators will often choose to waste in the name of equity, this is not necessarily the case. We review various psychological aspects that affect the allocators’ decision.