Interdependent preferences and segregating equilibria
Antoni Calvó-Armengol and
Antonio Cabrales ()
UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
This paper shows that models where preferences of individuals depend not only on their allocations, but also on the well-being of other persons, can produce both large and testable effects. We study the allocation of workers with heterogeneous productivities to firms. We show that even small deviations from purely “selfish” preferences leads to widespread workplace skill segregation. This result holds for a broad class and distribution of social preferences. That is, workers of different abilities tend to work in different firms, as long as they care somewhat more about the utilities of workers who are “close”.
Keywords: Contract; theory; Mechanism; design; Envy; Social; preferences; Skill; segregation (search for similar items in EconPapers)
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Journal Article: Interdependent preferences and segregating equilibria (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we072313
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