The equity theory: a quantitative perspective using data envelopment analysis

¹ Department of Management, Najafabad Branch, Islamic Azad University, Najafabad, Iran
² Department of Management, Faculty of Economics and Administrative Sciences, University of Qom, Qom 37185-359, Iran
³ Department of Mathematics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran
⁴ School of Business and Law, Edith Cowan University, Joondalup, WA 6027, Australia

^* Corresponding author: hosein.arman@yahoo.com

Received: 15 April 2022
Accepted: 4 October 2022

Abstract

Equity theory (ET) is an organizational theory investigating how fairly people feel they have been treated. The literature on ET does not address two essential questions: what is the magnitude of the equity that one may perceive compared to other members in an organization?, and how much should be the resources (outcomes) of an underpaid member reduced (increased) to feel equal? The group members may respond to these questions emotionally, and their answers could be biased based on their personalities. This paper proposes a novel method using data envelopment analysis (DEA) to quantify the ET and answer these questions more logically. DEA is a mathematical model that is conceptually similar to ET. We will show how DEA can estimate the degree of equity perceived by members of a group with different personalities, including optimistic, pessimistic, benevolent, and entitled characters.