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A measure of social loss for production economies with externalities

Author

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  • Maria Gabriella Graziano

    (Universitá degli studi di Napoli Federico II)

  • Vincenzo Platino

    (Universitá degli studi di Napoli Federico II)

Abstract

In this paper we consider a production economy and adopt a cooperative approach to equilibrium analysis which allows each individual to cooperate with others and to form a coalition whose members have access to the available technologies. We investigate the behavior of the core defined with respect to preferences (preferences-core) and with respect to resources (resources-core). We introduce a measure of social loss with respect to the core of the production economy which characterizes the corresponding core allocations. Our definition of the core requires that coalitions proposing a deviation take into account the consequences that changes in production plans may have for the counter-coalitions (considerate dominance). Our characterization holds in the presence of consumption externalities and an optimistic or a pessimistic attitude of coalition agents with respect to the behavior of outsiders.

Suggested Citation

  • Maria Gabriella Graziano & Vincenzo Platino, 2024. "A measure of social loss for production economies with externalities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(2), pages 443-474, September.
    • Handle: RePEc:spr:joecth:v:78:y:2024:i:2:d:10.1007_s00199-024-01574-9
    DOI: 10.1007/s00199-024-01574-9
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    More about this item

    Keywords

    Production economy; Core; Social loss; Selfish preferences; Other-regarding preferences;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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