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A Human Relations Paradox

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  • Hans Gersbach
  • Hans Haller

Abstract

We present a variant of a general equilibrium model with group formation to study how changes of non-consumptive beneï¬ts from group formation impact on the well-being of group members. We identify a human relations paradox: Positive externalities increase, but none of the group members gains in equilibrium. Moreover, a member who experiences an increase of positive emotional beneï¬ts in a group may become worse off in equilibrium.

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File URL: ftp://repec.econ.vt.edu/Papers/Haller/PowerParadoxV2.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Virginia Polytechnic Institute and State University, Department of Economics in its series Working Papers with number e07-29.

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Length: 9 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:vpi:wpaper:e07-29

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Keywords: group formation; competitive markets; human relation; exit;

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  1. Gersbach, Hans & Haller, Hans, 2011. "Groups, collective decisions and markets," Journal of Economic Theory, Elsevier, vol. 146(1), pages 275-299, January.
  2. Postlewaite, Andrew, 1979. "Manipulation via Endowments," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 255-62, April.
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