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A Theory of Endogenous Sentiments

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  • Joan Esteban
  • Laurence Kranich

Abstract

We present a model in which each agent's sentiments toward others are determined endogenously on the basis of how they behave relative to a standard of appropriate behavior. As sentiments change, so too does the optimal behavior of each individual, which in turn affects other agents' sentiments toward them. We focus on fixed points of this reciprocal adjustment process. To demonstrate the potential use and implications of such a model, we present an extended example involving team production. We then consider various standards of behavior, and we examine stationary patterns of behavior and sentiments under each.

Suggested Citation

  • Joan Esteban & Laurence Kranich, 2003. "A Theory of Endogenous Sentiments," Working Papers 102, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:102
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    References listed on IDEAS

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    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
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    4. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
    5. Joan Esteban & Laurence Kranich, "undated". "Redistributive Taxation With Endogenous Sentiments," Working Papers 33-02 Classification-JEL , Instituto de Estudios Fiscales.
    6. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
    7. Charness, Gary & Haruvy, Ernan, 2002. "Altruism, equity, and reciprocity in a gift-exchange experiment: an encompassing approach," Games and Economic Behavior, Elsevier, vol. 40(2), pages 203-231, August.
    8. Sethi, Rajiv & Somanathan, E., 2001. "Preference Evolution and Reciprocity," Journal of Economic Theory, Elsevier, vol. 97(2), pages 273-297, April.
    9. Dufwenberg, Martin & Kirchsteiger, Georg, 2004. "A theory of sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 47(2), pages 268-298, May.
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    11. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    12. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    13. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
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    Cited by:

    1. Joan Esteban & Laurence Kranich, 2003. "The Social Contracts with Endogenous Sentiments," Working Papers 71, Barcelona School of Economics.
    2. Joan Esteban & Laurence Kranich, "undated". "Redistributive Taxation With Endogenous Sentiments," Working Papers 33-02 Classification-JEL , Instituto de Estudios Fiscales.
    3. Alejandro Lugón Ceruti, 2018. "Altruism and Reciprocity in the Long-Run," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 41(82), pages 157-188.

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    More about this item

    Keywords

    Endogenous altruism; group formation; social contract;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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