Egoism

Mathematical Formulation

in anonymous situations, an agent cannot debate prices or influence

what others consume

own consumptionx∈RL+, others’ consumptiony∈RK, prices

p∈RL+, incomew> 0

utilityu(x,y), strictly concave and smooth inx

when is the solutiond(y,p,w) of

maximizeu(x,y) subject to p·x=w

independent ofy?

Definition

We say that agentibehaves as if selfish if her demand function

di

(

p,w,x−i

)

does not depend on others’ consumption plansx−i.