Equity Theory

Equity Theory, also known as Adams' Equity Theory, attempts to explain relational satisfaction in terms of perceptions of fair/unfair distributions of resources within interpersonal relationships. It was first developed in 1963 by John Stacy Adams, a workplace and behavioral psychologist, who asserted that employees seek to maintain equity between the inputs that they bring to a job and the outcomes that they receive from it against the perceived inputs and outcomes of others (Adams, 1965).

Contents

* 1 Background

o 1.1 Definition of Equity

o 1.2 Inputs and Outcomes

+ 1.2.1 Inputs

+ 1.2.2 Outcomes

o 1.3 Propositions

* 2 Equity Theory in Business

o 2.1 Assumptions of Equity Theory Applied to Business

o 2.2 Implications for Managers

* 3 Criticisms and Related Theories

o 3.1 Equity Sensitivity Construct

o 3.2 Fairness Model

* 4 References

* 5 Literature

Background

Equity theory proposes that individuals who perceive themselves as either under-rewarded or over-rewarded will experience distress, and that this distress leads to efforts to restore equity within the relationship. It focuses on determining whether the distribution of resources is fair to both relational partners. Equity is measured by comparing the ratios of contributions and benefits of each person within