Template-type: ReDif-Paper 1.0
Author-Name: Herings, P. Jean-Jacques
Author-workplace-name: RS: GSBE Theme Data-Driven Decision-Making, RS: GSBE Theme Conflict & Cooperation, Microeconomics & Public Economics
Author-Name: Saulle, Riccardo
Author-Name: Seel, Christian
Author-workplace-name: RS: GSBE Theme Conflict & Cooperation, Microeconomics & Public Economics
Title: The Last will be First, and the First Last: Segregation in Societies with Relative Payoff Concerns (RM/18/027-revised-)
Abstract: This paper studies coalition formation among individuals who differ in productivity. The output of a coalition is determined by the sum of the productivities and the size<br/>of the coalition. We consider egalitarian societies in which coalitions split their surplus equally and individualistic societies in which the surplus of a coalition is split according to productivity. Preferences of coalition members depend on their material payoffs, but are also influenced by relative payoff concerns, which relate their material payoffs to the average material payoff in the coalition. Our analysis uses two stability notions, the Core and the Myopic Stable Set.<br/>The stable partitions in both egalitarian and individualistic societies are segregated, i.e., individuals with adjacent productivities form coalitions. If some individuals are not part of a productive coalition, then these are the least productive ones for egalitarian societies and the most productive ones for individualistic societies. If all individuals have different productivity levels and there are sufficient complementarities in production, egalitarian societies induce more efficiency than individualistic societies.<br/>
Classification-JEL: c70,c71,d62
Series: GSBE Research Memoranda
Creation-Date: 20200326
Number: 011
File-URL: https://cris.maastrichtuniversity.nl/ws/files/47031505/RM20011.pdf
File-Format: application/pdf
File-Size: 670258
Handle: Repec:unm:umagsb:2020011
DOI: 10.26481/umagsb.2020011