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Copyright

Michael Richter; Ariel Rubinstein;

Published On

2024-11-13

Page Range

pp. 37–64

Language

  • English

Print Length

28 pages

2. The Permissible and the Forbidden

Chapter of: No Prices No Games!: Four Economic Models(pp. 37–64)
Following Richter and Rubinstein (2020), we analyze an equilibrium concept based upon social norms: the Y-equilibrium. A Y-equilibrium is a set of permissible alternatives and a profile of choices, one for each agent, such that:
(i) each agent's choice is optimal from among the permissible alternatives;
(ii) the profile of choices is feasible; and
(iii) the set of permissible alternatives is maximal in the sense that there is no superset of permissible alternatives from which a profile satisfying (i) and (ii) can be found.

By this definition, two forces make a permissible set unstable: The first modifies the permissible set in the case that the profile of (intended) choices is not feasible, while the second loosens restrictions on the permissible set as long as a new profile of optimal choices is feasible. We also consider a variant of this concept where we require that the permissible set is convex.
We study the Y-equilibria of a variety of examples and prove existence theorems, “welfare” theorems and a structure theorem when the set of alternatives is Euclidean.

Contributors

Michael Richter

(author)
https://orcid.org/0000-0002-5220-9995

Michael Richter is a professor of Economics at Baruch College, City University of New York and Royal Holloway, University of London. He is a graduate of the University of Chicago (BS, Math) and New York University (PhD, Economics). His research interests are in microeconomic theory, particularly decision theory, general equilibrium, and search. He lives in New York, with his wife and two kids. For other works, the author’s website is: http://www.mrichter.co/

Ariel Rubinstein

(author)
Emeritus in School of Economics at Tel Aviv University
Professor of Economics at New York University
https://orcid.org/0000-0003-1574-2659
https://arielrubinstein.org/

Ariel Rubinstein was born in Jerusalem and received his PhD from the Hebrew University in Jerusalem in 1979. Has been a Professor at the Hebrew University and at Princeton and currently is a Professor (Emeritus) at Tel Aviv University and a Professor of Economics at New York University. He has served as the President of the Econometric Society (2004). He is a foreign honorary member of the American Academy of Arts and Sciences and the American Economic Association, an Elected Fellow of the Israeli Academy of Sciences and Elected Corresponding Fellow of the British Academy. His 7 books reflect his research interests: Bargaining and Markets (with M. Osborne) (1990), A Course in Game Theory (with M. Osborne) (1994), Modeling Bounded Rationality (1998), Economics and Language (2000), Lecture Notes in Microeconomics (2005) and Models of Microeconomic Theory (with M.Osborne) (2020). His book Economic Fables (2012) presents his general views about Economic Theory. He created and manages the Atlas of Cafes (where one can think). All his books and articles are accessed through his homepage https://arielrubinstein.tau.ac.il.