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Interdependent Preference Formation

  • Levent Kockesen

    (New York University)

  • Efe A. Ok

    (New York University)

  • Rajiv Sethi

    (Barnard College, Columbia University)

A standard assumption in the economic approach to individual decision making is that people have independent preferences, that is, they care only about their absolute (material) payoffs. We study equilibria of the classic common pool resource extraction and public good games when some of the players have negatively interdependent preferences (in the sense that they care not only about their absolute payoffs but also about their relative payoffs) while the remainder have independent preferences. It is shown that at any equilibrium, those with interdependent preferences earn strictly higher absolute payoffs than do players with independent preferences. If the population composition evolves in accordance with any payoff monotonic evolutionary selection dynamics, then all players will have interdependent preferences in the long run. Similar (but weaker) results obtain for some other economically important classes of games in strategic form. The robustness of our findings with respect to other preference formation mechanisms such as myopic and rational socialization is also discussed.

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File URL: http://econwpa.repec.org/eps/game/papers/9708/9708002.pdf
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Paper provided by EconWPA in its series Game Theory and Information with number 9708002.

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Length: 35 pages
Date of creation: 04 Aug 1997
Date of revision:
Handle: RePEc:wpa:wuwpga:9708002
Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on HP; pages: 35 ; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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