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Other-Regarding Preference in General Equilibrium Author info | Abstract | Publisher info | Download info | Related research | Statistics Martin Dufwenberg
Paul Heidues
Georg Kirchsteiger
Frank Riedel
Joel Sobel
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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 behavior: 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 Université Libre de Bruxelles, Ecares in its series ECARES Working Papers with number
2008_011.
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Length: 49 pages
Date of creation: 2008Date of revision:
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Keywords: markets ; other-regarding preferences ; self-interest ; welfare theorems ; Other versions of this item:
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
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