Mathematics and Economics

(Michael S) #1
Egoism

As–If Selfish Demand — Examples


Clearly, standard ”egoistic” utility functionsvi(xi) =vi(xi 1 ,...,viL)
lead to as-if selfish behavior
Additive social preferences: letUi(xi,xj) =vi(xi) +vj(xj). Then
marginal utilities are independent ofxj,
Product Preferences:
Ui(xi) =vi(xi)vj(xj) =vi(xi 1 ,...,viL)vj(xj 1 ,...,vjL)
marginal utilities do depend on others’ consumption bundles
but marginal rates of substitution do not!
→as–if selfish behavior
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