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Biased preferences equilibrium

Published online by Cambridge University Press:  24 February 2021

Ariel Rubinstein
Affiliation:
School of Economics, Tel Aviv University, Tel Aviv, Israel 69978 and Department of Economics, New York University, NY NY 10012, USA
Asher Wolinksy
Affiliation:
Department of Economics, Northwestern University, Evanston, IL 60208, USA
Corresponding
E-mail address:

Abstract

We model economic environments in which individual choice sets are fixed and the level of a specific parameter that systematically modifies the preferences of all agents is determined endogenously to achieve equilibrium. The equilibrium concept, Biased Preferences Equilibrium, is reminiscent of competitive equilibrium: agents’ choice sets and their preferences are independent of the behaviour of other agents, the combined choices must satisfy overall feasibility constraints and the endogenous adjustment of the equilibrating preference parameter is analogous to equilibrating price adjustment. The concept is applied in a number of economic examples.

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© The Author(s), 2021. Published by Cambridge University Press

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