4. Biased Preferences Equilibrium

This chapter follows Rubinstein and Wolinsky (2022) who propose a biased preferences equilibrium solution concept in which agents' preference relations are systematically biased. The bias does not affect the agents' opportunity sets, but rather their preferences, which are systematically biased in such a way that the profile of agents' biased optimal choices is feasible.

We envision biases as a mechanism for bringing harmony to a multi-agent economy. These biases, like prices, apply uniformly to all agents. Every agent's final preferences are determined by his initial preferences and the commonly shared bias.

We apply the concept to three types of economies: the give-and-take, market economies with fixed prices and housing-type economies.