Other-Regarding Preferences in General Equilibrium

Dufwenberg, Martin; Heidhues, Paul; Kirchsteiger, Georg; Riedel, Frank; Sobel, Joel

doi:10.1093/restud/rdq026

Cited by 146 publications

(128 citation statements)

References 41 publications

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“…Similar observations, albeit not in mechanism design frameworks, have been made by Levine (1998), Fehr and Schmidt (1999), Bolton and Ockenfels (2000) or Segal and Sobel (2007). Dufwenberg et al (2011) demonstrate the behavioral irrelevance of interdependent preferences in general equilibrium under a separability condition that is essentially equivalent to selfishness in the absence of externalities.…”

Section: Example Continuedsupporting

confidence: 64%

Mechanism Design and Intentions

Bierbrauer

Netzer

2016

SSRN Journal

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We introduce intention-based social preferences into a mechanism design framework with independent private values and quasilinear payoffs. For the case where the designer has no information about the intensity of social preferences, we provide conditions under which mechanisms which have been designed under the assumption that agents are selfish can still be implemented. For the case where precise information about social preferences is available, we show that any tension between efficiency, incentive-compatibility, and voluntary participation may disappear. Impossibility results such as the one by Myerson and Satterthwaite (1983) are then turned into possibility results. We also provide a systematic account of the welfare implications of kindness sensations.

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Section: Example Continuedsupporting

confidence: 64%

Mechanism Design and Intentions

Bierbrauer

Netzer

2016

SSRN Journal

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“…However, many models of social preferences, such as the those of Rabin [1993], Fehr and Schmidt [1999], and Charness and Rabin [2002], have the property that fairness considerations do not affect people's marginal rates of substitution amongst different goods or between labor and leisure. 22 Consequently, people behave in general competitive equilibrium as if they did not care about fairness [Dufwenberg et al, 2011].…”

Section: Resultsmentioning

confidence: 99%

Preferences for Fair Prices, Cursed Inferences, and the Nonneutrality of Money

2015

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This paper explains the nonneutrality of money from two assumptions: (1) consumers dislike paying prices that exceed some fair markup on firms' marginal costs; and (2) consumers under infer marginal costs from available information. After an increase in money supply, consumers underappreciate the increase in nominal marginal costs and hence partially misattribute higher prices to higher markups; they perceive transactions as less fair, which increases the price elasticity of their demand for goods; firms respond by reducing markups; in equilibrium, output increases. By raising perceived markups, increased money supply inflicts a psychological cost on consumers that can offset the benefit of increased output.

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“…The data from treatments SPA and SPA-C are taken from Bartling and Netzer (2016) and will serve as the benchmark for comparison to our novel data from treatments SPA-S had classical, self-centered preferences because they are not pivotal in determining the payoff of a seller (see e.g. Dufwenberg et al, 2011). 3 See Brandt et al (2007) for a model in which the bidders may be exclusively spiteful and may not care about their own payoff at all.…”

Section: Experimental Designmentioning

confidence: 99%

Does the Absence of Human Sellers Bias Bidding Behavior in Auction Experiments?

2016

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This paper studies the impact of the presence of human subjects in the role of a seller on bidding in experimental second-price auctions. Overbidding is a robust finding in secondprice auctions, and spite among bidders has been advanced as an explanation. If spite extends to the seller, then the absence of human sellers who receive the auction revenue may bias upwards the bidding behavior in existing experimental auctions. We derive the equilibrium bidding function in a model where bidders have preferences regarding both, the payoffs of other bidders and the seller's revenue. Overbidding is optimal when buyers are spiteful only towards other buyers. However, optimal bids are lower and potentially even truthful when spite extends to the seller. We experimentally test the model predictions by exogenously varying the presence of human subjects in the roles of the seller and competing bidders. We do not detect a systematic effect of the presence of a human seller on overbidding. We conclude that overbidding is not an artefact of the standard experimental implementation of second-price auctions in which human sellers are absent.

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Other-Regarding Preferences in General Equilibrium

Cited by 146 publications

References 41 publications

Mechanism Design and Intentions

Mechanism Design and Intentions

Preferences for Fair Prices, Cursed Inferences, and the Nonneutrality of Money

Does the Absence of Human Sellers Bias Bidding Behavior in Auction Experiments?

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