@article{abc962b8cd604120af2ae7f63e7ca6fb,
title = "Other-regarding preferences in general equilibrium",
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.",
keywords = "Markets, Other-regarding preferences, Self-interest, Welfare theorems",
author = "Martin Dufwenberg and Paul Heidhues and Georg Kirchsteiger and Frank Riedel and Joel Sobel",
note = "Funding Information: Acknowledgement. This paper combines and extends portions of three independent papers written by subsets of the authors: “Do Social Preferences Matter in Competitive Markets?{"} by Heidhues and Riedel, “Classical Market Outcomes with Non-Classical Preferences” by Kirchsteiger and Dufwenberg and “Do Markets Make People Selfish?” by Sobel. We thank Geir Asheim, Robert Aumann, Dan Benjamin, Ted Bergstrom, Antoni Calv{\'o}-Armengol, Miguel Costa-Gomes, Vincent Crawford, Egbert Dierker, Armin Falk, Victor Ginsburg, Claus–Jochen Haake, Martin Hellwig, Matthew Jackson, James Jordan, Botond Ko˝szegi, John List, Mark Machina, Manfred Nermuth, Clemens Puppe, John Quah, Joachim Rosenm{\"u}ller, Herbert Scarf, Klaus Schmidt, Uzi Segal, Thomas Sterner, Jean-Marc Tallon, Walter Trockel, Hal Var-ian, Bill Zame, Klaus Zauner and referees for helpful comments. We also acknowledge comments from seminar audiences at the Autonomous University of Barcelona, University of California, Berkeley, Karlsruhe, Ludwig-Maximilians-Universit{\"a}t Munich, Nottingham, Paris I, Penn State, University of Southern California, the 2008 European Economic Association meetings in Milan, the General Equilibrium Workshop in Rio 2008, the 2008 Southwestern Economic Theory conference at University of California, Santa Barbara and the 2007 Stony Brook Gale Feast for comments. Hei-dhues thanks the Deutsche Forschungsgemeinschaft for financial support through SFB/TR 15. Kirchsteiger thanks the Banque Nationale de Belgique for financial support. Riedel thanks the Deutsche Forschungsgemeinschaft for financial support through grant Ri–1128–3–1 and Universities Paris I and IX for their hospitality and support. Sobel thanks the Guggenheim Foundation, National Science Foundation, and the Secretar{\'i}a de Estado de Universidades e Investigac{\'i}on del Ministerio de Educaci{\'o}n y Ciencia (Spain) for financial support and is grateful to the Departament d{\textquoteright}Economia i d{\textquoteright}Hist{\`o}ria Econ{\`o}mica and Institut d{\textquoteright}An{\`a}lisi Econ{\`o}mica of the Universitat Aut{\`o}noma de Barcelona for hospitality and administrative support.",
year = "2011",
month = apr,
day = "1",
doi = "10.1093/restud/rdq026",
language = "English (US)",
volume = "78",
pages = "613--639",
journal = "Review of Economic Studies",
issn = "0034-6527",
publisher = "Oxford University Press",
number = "2",
}