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A Human Relations Paradox

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Abstract

We present a variant of a general equilibrium model with group formation to study how changes of non-consumptive benefits from group formation impact on the well-being of group members. We identify a human relations paradox: Positive externalities increase, but none of the group members gains in equilibrium. Moreover, a member who experiences an increase of positive emotional benefits in a group may become worse off in equilibrium.

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  • Hans Gersbach & Hans Haller, 2011. "A Human Relations Paradox," CER-ETH Economics working paper series 11/145, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:11-145
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    1. Andrew Postlewaite, 1979. "Manipulation via Endowments," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(2), pages 255-262.
    2. Jagdish N. Bhagwati, 1968. "Distortions and Immiserizing Growth: a Generalization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 35(4), pages 481-485.
    3. Gersbach, Hans & Haller, Hans, 2011. "Groups, collective decisions and markets," Journal of Economic Theory, Elsevier, vol. 146(1), pages 275-299, January.
    4. Jagdish Bhagwati, 1958. "Immiserizing Growth: A Geometrical Note," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(3), pages 201-205.
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    Cited by:

    1. Hans Gersbach & Hans Haller, 2018. "Power at general equilibrium," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 50(3), pages 425-455, March.

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    More about this item

    Keywords

    Group formation; competitive markets; human relation; exit;
    All these keywords.

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General

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