Inequality aversion and externalities
AbstractWe conduct a general analysis of the effects of inequality aversion on decisions by homogeneous players in static and dynamic games. We distinguish between direct and indirect effects of inequality aversion. Direct effects are present when a player changes his action to affect disutility caused by inequality. Indirect effects occur when the own action is changed to affect other players’ actions. We provide necessary and sufficient conditions for the occurrence of either effect. Moreover, we examine the direction of the effects. Whereas indirect effects induce players to internalize externalities they impose on others, direct effects act in the opposite direction.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 84 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/jebo
Inequality aversion; Externalities; Direct effects; Indirect effects;
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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