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Affective interdependence and welfare

Author

Listed:
  • Aviad Heifetz
  • Enrico Minelli
  • Herakles Polemarchakis

Abstract

Purely affective interaction allows the welfare of an individual to depend on her own actions and on the profile of welfare levels of others. Under an assumption on the structure of mutual affection that we interpret as "non-explosive mutual affection," we show that equilibria of simultaneous-move affective interaction are Pareto optimal independently of whether or not an induced standard game exists. Moreover, if purely affective interaction induces a standard game, then an equilibrium profile of actions is a Nash equilibrium of the game, and this Nash equilibrium and Pareto optimal profile of strategies is locally dominant.

Suggested Citation

  • Aviad Heifetz & Enrico Minelli & Herakles Polemarchakis, 2023. "Affective interdependence and welfare," Papers 2305.10165, arXiv.org.
    • Handle: RePEc:arx:papers:2305.10165
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    References listed on IDEAS

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    1. Oded Galor, 1996. "Discrete Dynamical Systems," Working Papers 96-23, Brown University, Department of Economics.
    2. Martin Dufwenberg & Paul Heidhues & Georg Kirchsteiger & Frank Riedel & Joel Sobel, 2011. "Other-Regarding Preferences in General Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(2), pages 613-639.
    3. Oded Galor, 2007. "Discrete Dynamical Systems," Springer Books, Springer, edition 1, number 978-3-540-36776-5, December.
    4. Bergstrom, Ted, 1989. "Love and Spaghetti, the Opportunity Cost of Virtue," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 165-173, Spring.
    5. Pradeep Dubey, 1986. "Inefficiency of Nash Equilibria," Mathematics of Operations Research, INFORMS, vol. 11(1), pages 1-8, February.
    6. Winter, Sidney Jr., 1969. "A simple remark on the second optimality theorem of welfare economics," Journal of Economic Theory, Elsevier, vol. 1(1), pages 99-103, June.
    7. Debraj Ray & Rajiv Vohra, 2020. "Games of Love and Hate," Journal of Political Economy, University of Chicago Press, vol. 128(5), pages 1789-1825.
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    Cited by:

    1. Heifetz, Aviad, 2023. "The non-dismal science of intergenerational affective interactions," Games and Economic Behavior, Elsevier, vol. 140(C), pages 575-584.

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    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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