Social Preferences
An individual is said to have social preferences if their personal utility is influenced by the well-being of others, not just their own direct payoffs. This concept formally acknowledges that people often care about what happens to others, moving beyond the traditional assumption of pure self-interest. These preferences can be positive, such as altruism, or negative, such as spite and envy, and can also include a preference for fairness, like inequality aversion.
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Introduction to Microeconomics Course
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CORE Econ
Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Social Preferences
In many economic models, an individual is assumed to be purely self-interested. This means they make choices to maximize their own personal benefit (e.g., money, goods, or leisure) without any consideration for the well-being or outcomes of others. Imagine two people, Person A and Person B, are to receive a shared prize of $1,000. Person A is given the sole authority to decide how the money is split between them, and their decision is final with no future consequences. Based only on the assumption of pure self-interest, what distribution will Person A choose?
Predicting Behavior in a Shared Resource Scenario
According to the economic assumption of pure self-interest, an individual making a decision will always choose the option that results in the worst possible outcome for other people involved.
Analyzing Individual Choice in a Group Project
Match each decision-making motivation with its corresponding description.
Evaluating the Predictive Power of the Self-Interest Assumption
In a strategic interaction modeled by economists, a player who only considers their own final score or payment when making a decision, ignoring any impact on the other players' scores, is acting according to the principle of ____.
In many economic models, individuals are assumed to act based on pure self-interest. This means they make decisions solely to maximize their own personal outcomes (like money or goods) and are indifferent to the effects of their choices on others. Given this assumption, which of the following scenarios describes an action that is inconsistent with pure self-interest?
Evaluating a Business Strategy Decision
A person is presented with two options. Option A gives them $10 and another person $5. Option B gives them $10 and the other person $20. According to the economic assumption of pure self-interest, the person would be indifferent between Option A and Option B.
Enhancing Game-Theoretic Models to Account for Cooperative Behavior
Explaining Apparent Altruism as Long-Term Self-Interest
Contextual Applicability of the Self-Interest Model
Individual Preferences
Use of Controlled Experiments to Empirically Investigate Economic Behavior
Market Failures from the Pursuit of Self-Interest
Social Preferences
Learn After
Altruism
Inequality Aversion
Spite and Envy as Social Preferences
Zoë's Dilemma with Lottery Winnings
Situational Nature of Social Preferences
In a one-time, anonymous interaction, Person A is given $20 and can offer any portion of it to Person B. Person B has no choice but to accept the offer. A model assuming individuals are motivated solely by their own financial gain would predict that Person A will offer $0 and keep the full $20. However, in real-world experiments, Person A often chooses to offer a positive amount (e.g., $5). Which of the following provides the best explanation for this observed behavior?
An economic model that incorporates the idea that individuals' utility can be influenced by the well-being of others will always predict more generous and cooperative outcomes compared to a model assuming individuals only care about their own direct payoffs.
Partnership Dissolution Decision
Each scenario below describes an individual's decision. Match each scenario to the underlying preference that best explains the behavior.
Analyzing a Bonus Split Decision
Evaluating Assumptions in Economic Models
When an individual's personal satisfaction or utility is affected by the material payoffs or well-being of other people, and not just their own, they are said to exhibit ____.
In which of the following scenarios does an individual's action provide the clearest evidence that their utility is influenced by more than just their own direct material payoff?
An individual whose utility is solely determined by their own material payoff will always choose a different course of action than an individual whose utility is also influenced by the well-being of others, given an identical set of choices that impact both individuals.
The Community Garden Decision
Altruism
Inequality Aversion
Positive Reciprocity
Reciprocity
Classification of Social Preferences