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Social Decision Theory: Choosing within and between Groups

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  • Fabio Maccheroni
  • Massimo Marinacci
  • Aldo Rustichini

Abstract

We introduce a theoretical framework in which to study interdependent preferences, where the outcome of others affects the preferences of the decision maker. The dependence may take place in two conceptually different ways, depending on how the decision maker evaluates what the others have. In the first he values his outcome and that of others on the basis of his own utility. In the second, he ranks outcomes according to a social value function. These two different views of the interdependence have separate axiomatic foundations. We then characterize preferences according to the relative importance assigned to social gains and losses, or in other words to pride and envy. Finally, we study a two period economy in which agents have our social preferences. We show how envy leads to conformism in consumption behavior and pride to diversity.

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Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 71.

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Length: 103 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:cca:wpaper:71

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Keywords: Social preferences; social economics.;

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Cited by:
  1. Zhang, W.-B., 2014. "Ethnic Human Capital Externalities and Inequality in a General Equilibrium Growth Model," Journal of the New Economic Association, New Economic Association, New Economic Association, vol. 21(1), pages 33-54.
  2. Lahno, Amrei M. & Serra-Garcia, Marta, 2012. "Peer Effects in Risk Taking," Discussion Papers in Economics 14309, University of Munich, Department of Economics.
  3. Martin Dufwenberg & Paul Heidhues & Georg Kirchsteiger & Frank Riedel & Joel Sobel, 2011. "Other-Regarding Preferences in General Equilibrium," ULB Institutional Repository 2013/149598, ULB -- Universite Libre de Bruxelles.
  4. Jan-Dirk Schmöcker & Tsuyoshi Hatori & David Watling, 2014. "Dynamic process model of mass effects on travel demand," Transportation, Springer, Springer, vol. 41(2), pages 279-304, March.
  5. Sushil Bikhchandani & Uzi Segal, 2009. "Transitive Regret," Boston College Working Papers in Economics 711, Boston College Department of Economics, revised 24 Oct 2009.
  6. Joel Sobel, 2009. "Generous actors, selfish actions: markets with other-regarding preferences," International Review of Economics, Springer, Springer, vol. 56(1), pages 3-16, March.
  7. Kircher, Philipp & Sandroni, Alvaro & Ludwig, Sandra, 2009. "Fairness: A Critique to the Utilitarian Approach," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 288, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. Burnham, Terence C., 2013. "Toward a neo-Darwinian synthesis of neoclassical and behavioral economics," Journal of Economic Behavior & Organization, Elsevier, vol. 90(S), pages S113-S127.
  9. Astrid Gamba & Elena Manzoni, 2014. "Social comparison and risk taking behavior," Working Papers, University of Milano-Bicocca, Department of Economics 266, University of Milano-Bicocca, Department of Economics, revised Jan 2014.

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