The Last will be First and the First Last - Segregation in Societies with Relative Payoff Concerns

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Abstract

This article studies coalition formation among individuals who differ in productivity. We consider egalitarian societies in which coalitions split their surplus equally and individualistic societies in which coalitions split their surplus according to productivity. Preferences of coalition members depend on their material pay-offs, but are also influenced by relative pay-off concerns. 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.
Original languageEnglish
Pages (from-to)2119-2143
Number of pages25
JournalThe Economic Journal
Volume131
Issue number637
Early online date2020
DOIs
Publication statusPublished - Jul 2021

JEL classifications

  • d62 - Externalities
  • c70 - Game Theory and Bargaining Theory: General
  • c71 - Cooperative Games

Keywords

  • COALITION-FORMATION
  • STABILITY
  • POWER
  • CORE
  • EQUILIBRIUM
  • PREFERENCES
  • ORIGINS
  • INCOME
  • SET

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