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How Exposure to Markets Can Favor Inequity-Averse Preferences


Zubrickas, Robertas (2010). How Exposure to Markets Can Favor Inequity-Averse Preferences. Working paper series / Institute for Empirical Research in Economics No. 473, University of Zurich.

Abstract

This paper shows how non-individualistic preferences can be individual fitness maximizing in the presence of general equilibrium externalities. In the model, individuals share an endowment, which can be consumed on its own and/or used as a means of exchange to purchase goods from merchants on the external market if such exists. Assuming that increased consumption means increased individual fitness, we show that inequity-averse behavior with respect to endowment distribution can benan optimal response to merchants' price discrimination and lead to the evolution ofninequity-averse preferences. The findings presented here are supported by empirical evidence on the endogeniety of people's preferences with respect to exposure to market exchange.

Abstract

This paper shows how non-individualistic preferences can be individual fitness maximizing in the presence of general equilibrium externalities. In the model, individuals share an endowment, which can be consumed on its own and/or used as a means of exchange to purchase goods from merchants on the external market if such exists. Assuming that increased consumption means increased individual fitness, we show that inequity-averse behavior with respect to endowment distribution can benan optimal response to merchants' price discrimination and lead to the evolution ofninequity-averse preferences. The findings presented here are supported by empirical evidence on the endogeniety of people's preferences with respect to exposure to market exchange.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:February 2010
Deposited On:29 Nov 2011 15:09
Last Modified:07 Dec 2017 09:59
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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