Other-Regarding Preferences in General Equilibrium

Martin Dufwenberg, Paul Heidhues (), Georg Kirchsteiger, Frank Riedel and Joel Sobel

The Review of Economic Studies, 2011, vol. 78, issue 2, 613-639

Abstract: We study competitive market outcomes in economies where agents have other-regarding preferences (ORPs). We identify a separability condition on monotone preferences that is necessary and sufficient for one's own demand to be independent of the allocations and characteristics of other agents in the economy. Given separability, it is impossible to identify ORPs from market behaviour: agents behave as if they had classical preferences that depend only on own consumption in competitive equilibrium. If preferences, in addition, depend only on the final allocation of consumption in society, the Second Welfare Theorem holds as long as any increase in resources can be distributed in a way that makes all agents better off. The First Welfare Theorem generally does not hold. Allowing agents to care about their own consumption and the distribution of consumption possibilities in the economy, the competitive equilibria are efficient given prices if and only if there is no Pareto-improving redistribution of income. Copyright 2011, Oxford University Press.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (110)

Downloads: (external link)
http://hdl.handle.net/10.1093/restud/rdq026 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Other-Regarding Preferences in General Equilibrium (2011)
Working Paper: Other-Regarding Preferences in General Equilibrium (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:78:y:2011:i:2:p:613-639

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().