Formulating Social Interactions in Utility Theory of Economics*

Abstract

Individualistic utility theory has long been the core of economics since its appearance in the end of the 19G. This theory explicitly presumes that agents in the societies arehomogeneousin a sense of all fulfilling a certain set of similar rational preference postulates. Another conspicuous feature of the story is to assume that every individual is based on a universally giveninnatepreference as never been affected by outside environments or random shocks. Into individual’s decision the cost for social interaction has never been taken account. Recently, sonic new innovations to overcome these limitations in utility theory are coming up to renew our old story entirely. These have some different springs. One of these comes from the idea ofrandom preferencein economics, which could be traced back to Hildenbrand [9]. Even if agents were homogeneous, random shocks could generate a fluctuation in a macroscopic structure of social states.