Analysis of the core under inequality-averse utility functions

We reexamine core-stability, incorporating inequality-averse preferences and challenging the conventional core's stability under such preferences. We integrate existing social preferences tied to inequality aversion into a cooperative game model with transferable utility (TU games), introducing a novel core. We characterize the new core through inequalities akin to the "coalitional rationality"in TU games and conduct a comparative statics analysis on two parameters-envy and sympathy-representing inequality aversion. Our findings reveal that an increase in the envy parameter reduces elements in the new core, while heightened sympathy does not consistently decrease core elements.