Abstract
Schelling's segregation model demonstrates how simple local rules can generate large-scale social patterns, yet it assumes agents act myopically and ignore the broader consequences of their moves. We extend this framework by introducing social orientation as a behavioral microfoundation, reflecting humans' communal nature. Socially oriented agents follow boundedly rational heuristics that account for the satisfaction of prospective neighbors within a two-step horizon of observability, in addition to their own. We formalize this through three relocation rules-negative externality avoiding (NEA), positive externality favoring (PEF), and positive externality optimizing (PEO)-each capturing a different balance between minimizing disruption and promoting stability. Agent-based simulations reveal that these rules, while maintaining satisfaction, consistently reduce segregation, accelerate the attainment of global stability, and lower relocation moves per agent, thereby reducing social costs. These results provide a stronger behavioral foundation for segregation modeling and show how locally rational, socially sensitive decision-making can scale into equilibria that are not just welfare-enhancing but also yield more integrated and resilient communities.