Interdependent Preferences and Segregating Equilibria Articles
Overview
published in
- JOURNAL OF ECONOMIC THEORY Journal
publication date
- March 2008
start page
- 99
end page
- 113
issue
- 1
volume
- 139
Digital Object Identifier (DOI)
International Standard Serial Number (ISSN)
- 0022-0531
Electronic International Standard Serial Number (EISSN)
- 1095-7235
abstract
- 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. 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". This result holds for a broad class and distribution of social preferences.