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On the rationality of mutually immiserating coercion

Authors
Journal
Journal of Economic Behavior & Organization
0167-2681
Publisher
Elsevier
Publication Date
Volume
30
Issue
1
Identifiers
DOI: 10.1016/s0167-2681(96)00847-5
Keywords
  • Coercion
  • Positional Goods
  • Power
  • Relative Income
  • Welfare Economics

Abstract

Abstract The pursuit of relative advantage in a setting where one person has power over another may yield perfectly rational decisions by the person in power which reduce the wealth of all affected parties, including the person in power. This contrasts with decisions by independent egoistic decision makers who, in a similar circumstances, will not pursue transfers when they are known to cost more to obtain than would be realized. Utility functions that include relative wealth or position as arguments have the property that utility increases as relative wealth increases. Consequently mutually immiserating policies may be rationally undertaken if they yield sufficient relative advantage to offset absolute wealth reductions.

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