Social Interactions and Markets Gary S. Becker University of - - PowerPoint PPT Presentation

Social Interactions and Markets

Gary S. Becker

University of Chicago

Building Bridges between Economics and Personality Psychology May 9, 2009

Gary S. Becker Social Interactions

Employer Discrimination and Heterogeneity in Tastes

Costs / Prices Output Costs of a Discriminator D Costs of a Non- Discriminator D

Discriminators have to pay to discriminate. Cost too great in this case.

Gary S. Becker Social Interactions

Escalating Cost of Social Preferences

PM / PV

sm, fraction of L who own M

sm = 1

f

Willingness to pay as function of sm

L 𝑡

1

Gary S. Becker Social Interactions

Fair Wage and Market Wage

First Scenario Wage Quantity of Labor Individual’s Fair Wage D Market Wage D

𝑥 w* *

No Job N

Gary S. Becker Social Interactions

Fair Wage and Market Wage

Second Scenario Wage Quantity of Labor All Individuals’ Fair Wage D D N

𝑥 = 𝑥∗

N* Unemployment

Gary S. Becker Social Interactions