Equity Theory

Components of Equity Theory

According to equity theory, people make comparisons between themselves and certain referent others with respect to two key factors—inputs and outcomes.

• Inputs consist of those things a person perceives as contributing to his or her worth in a relationship. In a work setting, inputs are likely to consist of a person's previous experience, knowledge, skills, seniority, and effort.
• Outcomes are the perceived receipts of an exchange relationship—that is, what the person believes to get out of it. On the job, primary outcomes are likely to be rewards such as one's pay and fringe benefits, recognition, and the status accorded an individual by others.

It is important to note that the inputs and outcomes considered by equity theory are perceptual in nature. As such, they must be recognized by their possessor and considered relevant to the exchange.

The referent other whose outcomes and inputs are being judged may be either internal or external in nature. Internal comparisons include oneself at an earlier point in time or some accepted (i.e., internalized) standard. External comparisons involve other individuals, typically selected based on convenience or similarity. Equity theory is rather vague about the specific mechanisms through which referent others are chosen.

States of Equity and Inequity

In the course of a social exchange with another, or when a person (P) and another (O) are corecipients in a direct exchange with a third party, P and O will compare their own and others' inputs and outcomes. A state of equity is said to exist for P whenever he or she perceives that the ratio of his or her own outcomes to inputs is equal to the corresponding ratio of O's outcomes to inputs. Thus, a state of equity is said to exist for P when

Individuals experiencing states of equity in a relationship are said to feel satisfied with those relationships.

By contrast, a state of inequity is said to exist for P whenever he or she perceives that the ratio of his or her own outcomes to inputs and the ratio of O's outcomes to inputs are unequal. Inequitable states are purported to result in tension—known as inequity distress—and negative affective reactions. The degree of these adverse reactions is said to be proportional to the perceived magnitude of the inequity. Equity theory distinguishes between the following two types of inequitable states:

• Underpayment inequity is said to exist for P whenever his or her own outcome–input ratio is less than the corresponding outcome–input ratio of O—that is, when

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