The Last Will be First, and the First Last: Segregation in Societies with Relative Pay-off Concerns

Abstract This article studies coalition formation among individuals who differ in productivity. We consider egalitarian societies in which coalitions split their surplus equally and individualistic societies in which coalitions split their surplus according to productivity. Preferences of coalition...

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Bibliographic Details
Published in:The Economic journal (London) 2021-07, Vol.131 (637), p.2119-2143
Main Authors: Herings, P Jean-Jacques, Saulle, Riccardo D, Seel, Christian
Format: Article
Language:English
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Summary:Abstract This article studies coalition formation among individuals who differ in productivity. We consider egalitarian societies in which coalitions split their surplus equally and individualistic societies in which coalitions split their surplus according to productivity. Preferences of coalition members depend on their material pay-offs, but are also influenced by relative pay-off concerns. The stable partitions in both egalitarian and individualistic societies are segregated, i.e., individuals with adjacent productivities form coalitions. If some individuals are not part of a productive coalition, then these are the least productive ones for egalitarian societies and the most productive ones for individualistic societies.
ISSN:0013-0133
1468-0297
DOI:10.1093/ej/ueaa083