The Rise and Spread of Favoritism Practices

The B.E. Journal of Theoretical Economics, Forthcoming

Posted: 18 Sep 2012 Last revised: 26 Mar 2014

See all articles by Miguel A. Duran

Miguel A. Duran

University of Malaga

Antonio Morales

University of Malaga - Departamento de Teoría e Historia Económics

Date Written: March 1, 2014

Abstract

The common sensical definition of favoritism implies some kind of discrimination. We propose a model where a group of agents commit to give preference to their members when making job offers. This endogamic behavior is advantageous because members enjoy preferential job offers, but they incur in link costs and potential efficiency losses. Unlike the standard approach to favoritism, agents in our model make strategic joining decisions and as a result of the counterbalancing effects of favoritsm, an optimal clique size appears in equilibrium. We show that favoritism is not compatible with large inefficiency losses and that there exists a non-monotonic relation between the unemployment level and favoritism practices. Societies with multiple equilibria are also found.

Keywords: favoritism, group formation, labor market

JEL Classification: D71, J49, J71

Suggested Citation

Duran, Miguel A. and Morales, Antonio, The Rise and Spread of Favoritism Practices (March 1, 2014). The B.E. Journal of Theoretical Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2148335 or http://dx.doi.org/10.2139/ssrn.2148335

Miguel A. Duran (Contact Author)

University of Malaga ( email )

Dpt. of Economics
Business School
Malaga, 29013
Spain

HOME PAGE: http://webpersonal.uma.es/~maduran/portada.htm

Antonio Morales

University of Malaga - Departamento de Teoría e Historia Económics ( email )

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