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...

In a model of strategic network formation, the endogenously formed network is built around a pre-existing network. We envisage that the pre-existing or core network is publicly provided. Strategic network formation is decentralized: Players act in their private interest and bear the costs when...

We examine repeated collective decisions in which people care about how others are treated. We formulate the notion of preferences for harmony as the desire of a person that others should not suffer repeatedly from the tyranny of majorities. We suggest that minority voting is a suitable scheme...

Democratic processes may not take the welfare of future generations sufficiently into account and thus may not achieve sustainability. We introduce rejection/support rewards (RSRs) and show that a dual democratic mechanism-RSRs and elections-can achieve sustainability. RSRs stipulate that...

We explore how tax contracts affect government formation and welfare of voters in a democracy with proportional elections, four parties and sincere voting. A tax contract specifies a range of tax rates a party is committed to if in government. We develop a new model of party competition and...