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Interdependent preferences and segregating equilibria

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  • Antonio Cabrales

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  • Antoni Calvo-Armengol

    ()

Abstract

This paper shows that models where preferences of individuals depend not only on their allocations, but also on the well-being of other persons, can produce both large and testable effects. We study the allocation of workers with heterogeneous productivities to firms. We show that even small deviations from purely “selfish” preferences leads to widespread workplace skill segregation. This result holds for a broad class and distribution of social preferences. That is, workers of different abilities tend to work in different firms, as long as they care somewhat more about the utilities of workers who are “close”.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we072313.

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Date of creation: Mar 2007
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Handle: RePEc:cte:werepe:we072313

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Cited by:
  1. Sabrina Teyssier, 2007. "Optimal Group Incentives with Social Preferences and Self-Selection," Post-Print halshs-00144901, HAL.
  2. Dominik Erharter, 2013. "Screening Experts' Distributional Preferences," Working Papers 2013-27, Faculty of Economics and Statistics, University of Innsbruck.
  3. Dominik Erharter, 2012. "Credence goods markets, distributional preferences and the role of institutions," Working Papers 2012-11, Faculty of Economics and Statistics, University of Innsbruck.
  4. Antonio Cabrales & Raffaele Miniaci & Marco Piovesan & Giovanni Ponti, 2009. "Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts," Working Papers 2009-09, FEDEA.
  5. Sabrina Teyssier, 2008. "Les Modes de Rémunération comme Mécanismes Sélectifs de la Main d’oeuvre : Fondements Théoriques et Estimations Empiriques," Working Papers 0818, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  6. Sabrina Teyssier, 2008. "Experimental Evidence on Inequity Aversion and Self-Selection between Incentive Contracts," Working Papers 0821, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  7. Felix Bierbrauer & Nick Netzer, 2012. "Mechanism design and intentions," ECON - Working Papers 066, Department of Economics - University of Zurich, revised Apr 2014.

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