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Other-Regarding Preferences in General Equilibrium Author info | Abstract | Publisher info | Download info | Related research | Statistics Dufwenberg, Martin
Heidhues, Paul
Kirchsteiger, Georg
Riedel, Frank
Sobel, Joel
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registered author(s):
We study competitive market outcomes in economies where agents have other-regarding preferences. We identify a separability condition on monotone preferences that is necessary and sufficient for one's own demand to be independent of the allocations and characteristics of other agents in the economy. Given separability, it is impossible to identify other-regarding preferences from market behaviour: agents behave as if they had classical preferences that depend only on own consumption in competitive equilibrium. If preferences, in addition, depend only on the final allocation of consumption in society, the Second Welfare Theorem holds as long as an increase in resources can be distributed such that all agents are better off. Nevertheless, the First Welfare Theorem generally does not hold. Allowing agents to care about their own consumption and the distribution of consumption possibilities in the economy, we provide a condition under which agents have no incentive to make direct transfers, and show that this condition implies that competitive equilibria are efficient given prices.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
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Date of creation: May 2008Date of revision:
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Keywords: markets ; other-regarding preferences ; self-interest ; welfare ; Other versions of this item:
Find related papers by JEL classification: D5 - Microeconomics - - General Equilibrium and Disequilibrium D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement D64 - Microeconomics - - Welfare Economics - - - Altruism
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