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Why Social Preferences Matter - The Impact of Non-Selfish Motives on Competition

  • Ernst Fehr
  • Urs Fischbacher

A substantial number of people exhibit social preferences, which means they are not solely motivated by material self-interest but also care positively or negatively for the material payoffs of relevant reference agents. We show empirically that economists fail to understand fundamental economic questions when they disregard social preferences, in particular, that without taking social preferences into account, it is not possible to understand adequately (i) the effects of competition on market outcomes, (ii) laws governing cooperation and collective action, (iii) effects and the determinants of material incentives, (iv) which contracts and property rights arrangements are optimal, and (v) important forces shaping social norms and market failures.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 084.

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