A measure of social loss for production economies with externalities

Maria Graziano and Vincenzo Platino ()
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Vincenzo Platino: Universitá degli studi di Napoli Federico II

Economic Theory, 2024, vol. 78, issue 2, No 4, 443-474

Abstract: Abstract In this paper we consider a production economy and adopt a cooperative approach to equilibrium analysis which allows each individual to cooperate with others and to form a coalition whose members have access to the available technologies. We investigate the behavior of the core defined with respect to preferences (preferences-core) and with respect to resources (resources-core). We introduce a measure of social loss with respect to the core of the production economy which characterizes the corresponding core allocations. Our definition of the core requires that coalitions proposing a deviation take into account the consequences that changes in production plans may have for the counter-coalitions (considerate dominance). Our characterization holds in the presence of consumption externalities and an optimistic or a pessimistic attitude of coalition agents with respect to the behavior of outsiders.

Keywords: Production economy; Core; Social loss; Selfish preferences; Other-regarding preferences (search for similar items in EconPapers)
JEL-codes: C71 D11 D21 D62 D64 (search for similar items in EconPapers)
Date: 2024
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Working Paper: A Measure of Social Loss for Production Economies with Externalities (2022)
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DOI: 10.1007/s00199-024-01574-9

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