HABIT FORMATION AND THE SELF-FULFILLING "BAD STEADY STATE EQUILIBRIUM"

Marina Semerdjieva ()
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Marina Semerdjieva: Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski

Yearbook of the Faculty of Economics and Business Administration, Sofia University, 2014, vol. 12, issue 1, 251-271

Abstract: Social norms and habits in consumption determine what is regarded as fair, influencing in such a way the economically and socially significant choices people make. We should be able to overcome theway the economically and socially significant choices people make. We should be able to overcome the inside tension of unevenly distributed income, be able not to exploit the unfair situation for personal benefits if we know the long-term consequences. Only doing this we will stimulate an efficient equilibrium solution for the whole group. Expecting that an irrational reaction will have its supporters and acting against the common attitude, not taking into account the new opportunity for gains, we in fact contribute towards better market efficiency. Individuals have a need to believe in a fair world just to play safe that not the whole society will act as free rider. The conclusion itself is that sometimes, even the irrational decision of a small group of people, trying to adjust inequality, can be beneficial for the society. In order to be able to predict more successfully consumer behavioral patterns we need to enrich the rationality model with a model of social commitment.

Keywords: Socio economicus; habit formation; equilibrium efficiency; fairness. (search for similar items in EconPapers)
Date: 2014
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