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Inequality, Happiness and Relative Concerns: What Actually is their Relationship?

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    Abstract

    This paper studies information transmission between multiple agents with different preferences and a welfare maximizing decision maker who chooses the quality or quantity of a public good (e.g. provision of public health service; carbon emissions policy; pace of lectures in a classroom) that is consumed by all of them. Communication in such circumstances su¤ers from the agents. incentive to "exaggerate" their preferences relative to the average of the other agents, since the decision maker's reaction to each agent's message is weaker than in one-to-one communication. As the number of agents becomes larger the quality of information transmission diminishes. The use of binary messages (e.g. "yes" or "no") is shown to be a robust mode of communication when the main source of informational distortion is exaggeration.

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    File URL: http://www.econ.ed.ac.uk/papers/KawamuraCPG01.pdf
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    Bibliographic Info

    Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 182.

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    Length: 27
    Date of creation: 01 Jun 2008
    Date of revision:
    Handle: RePEc:edn:esedps:182

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    Related research

    Keywords: : Communication; Public Good Provision; Cheap Talk; Committee; Non-binding Referendum;

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    1. Marco Battaglini, 2002. "Multiple Referrals and Multidimensional Cheap Talk," Econometrica, Econometric Society, vol. 70(4), pages 1379-1401, July.
    2. Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections with Private Information," Econometrica, Econometric Society, vol. 65(5), pages 1029-1058, September.
    3. Martimort, David & Semenov, Aggey, 2008. "The Informational Effects of Competition and Collusion in Legislative Politics," MPRA Paper 6989, University Library of Munich, Germany.
    4. Corchón, Luis C. & Baliga, S. & Sjostrom, T., . "The Theory of Implementation when the Planner is a Player," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/4187, Universidad Carlos III de Madrid.
    5. William Fuchs & Vinicius Carrasco, 2008. "Dividing and Discarding A Procedure for Taking Decisions with Non-transferable Utility," 2008 Meeting Papers 315, Society for Economic Dynamics.
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    Cited by:
    1. Christian Bjørnskov & Axel Dreher & Justina A.V. Fischer & Jan Schnellenbach, 2009. "On the relation between income inequality and happiness: Do fairness perceptions matter?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 20, Courant Research Centre PEG.
    2. Boris Gershman, 2012. "The Two Sides of Envy," Working Papers 2012-19, American University, Department of Economics.
    3. Daniel Sámano, 2009. "Explaining Taxes at the Upper Tail of the Income Distribution: The Role of Utility Interdependence," Working Papers 2009-16, Banco de México.
    4. Perez Truglia, Ricardo Nicolas, 2007. "Conspicuous consumption in the land of Prince Charming," MPRA Paper 22009, University Library of Munich, Germany, revised 22 Mar 2010.
    5. Silber, Jacques & Verme, Paolo, 2012. "Relative deprivation, reference groups and the assessment of standard of living," Policy Research Working Paper Series 5930, The World Bank.
    6. Bjørnskov, Christian & Dreher, Axel & Fischer, Justina A. V. & Schnellenbach, Jan, 2009. "On the relation between income inequality and happiness: Do fairness perceptions matter?," Center for European, Governance and Economic Development Research Discussion Papers 91, University of Goettingen, Department of Economics.
    7. Ed Hopkins & Tatiana Kornienko, 2005. "Methods of Comparison in Games of Status," ESE Discussion Papers 138, Edinburgh School of Economics, University of Edinburgh.

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