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Affective interdependence and welfare

Author

Listed:
  • Heifetz, Aviad

    (Open University Tel Aviv)

  • Minelli, Enrico

    (University of Brescia)

  • Polemarchakis, Herakles

    (University of Warwick)

Abstract

Purely affective interaction allows the welfare of an individual to depend on her own actions and on the profile of welfare levels of others. Under an assumption on the structure of mutual affection that we interpret as nonexplosive mutual affection, we show that equilibria of simultaneous-move affective interaction are Pareto optimal independently of whether or not an induced standard game exists. Moreover, if purely affective interaction induces a standard game, then an equilibrium profile of actions is a Nash equilibrium of the game, and this Nash equilibrium and Pareto optimal profile of strategies is locally dominan

Suggested Citation

  • Heifetz, Aviad & Minelli, Enrico & Polemarchakis, Herakles, 2023. "Affective interdependence and welfare," CRETA Online Discussion Paper Series 76, Centre for Research in Economic Theory and its Applications CRETA.
    • Handle: RePEc:wrk:wcreta:76
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/creta/papers/manage/creta76_-_herakles_polemarchakis.pdf
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    References listed on IDEAS

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    1. Martin Dufwenberg & Paul Heidhues & Georg Kirchsteiger & Frank Riedel & Joel Sobel, 2011. "Other-Regarding Preferences in General Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(2), pages 613-639.
    2. Winter, Sidney Jr., 1969. "A simple remark on the second optimality theorem of welfare economics," Journal of Economic Theory, Elsevier, vol. 1(1), pages 99-103, June.
    3. Oded Galor, 2007. "Discrete Dynamical Systems," Springer Books, Springer, edition 1, number 978-3-540-36776-5, June.
    4. Debraj Ray & Rajiv Vohra, 2020. "Games of Love and Hate," Journal of Political Economy, University of Chicago Press, vol. 128(5), pages 1789-1825.
    5. Bergstrom, Ted, 1989. "Love and Spaghetti, the Opportunity Cost of Virtue," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 165-173, Spring.
    6. Pradeep Dubey, 1986. "Inefficiency of Nash Equilibria," Mathematics of Operations Research, INFORMS, vol. 11(1), pages 1-8, February.
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    Cited by:

    1. Heifetz, Aviad, 2023. "The non-dismal science of intergenerational affective interactions," Games and Economic Behavior, Elsevier, vol. 140(C), pages 575-584.

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    More about this item

    Keywords

    purely affective interactions ; Pareto optimality JEL codes: D62;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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