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A Human Relations Paradox

Author

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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.

Suggested Citation

  • Hans Gersbach & Hans Haller, 2011. "A Human Relations Paradox," Working Papers e07-29, Virginia Polytechnic Institute and State University, Department of Economics.
  • Handle: RePEc:vpi:wpaper:e07-29
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    File URL: ftp://repec.econ.vt.edu/Papers/Haller/PowerParadoxV2.pdf
    File Function: First version, 2010
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    References listed on IDEAS

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    1. Andrew Postlewaite, 1979. "Manipulation via Endowments," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 255-262.
    2. Gersbach, Hans & Haller, Hans, 2011. "Groups, collective decisions and markets," Journal of Economic Theory, Elsevier, vol. 146(1), pages 275-299, January.
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    1. repec:spr:sochwe:v:50:y:2018:i:3:d:10.1007_s00355-017-1091-3 is not listed on IDEAS

    More about this item

    Keywords

    group formation; competitive markets; human relation; exit;

    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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