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A Human Relations Paradox

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Abstract

We present a variant of a general equilibrium model with group formation to study how changes of non-consumptive benefits 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 benefits in a group may become worse off in equilibrium.

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  • Hans Gersbach & Hans Haller, 2011. "A Human Relations Paradox," CER-ETH Economics working paper series 11/145, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:11-145
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    2. Hans Gersbach & Hans Haller, 2018. "Power at general equilibrium," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 50(3), pages 425-455, March.

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    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General

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