Fairness under Uncertainty
AbstractEver since its introduction by Foley (1967) and Varian (1974), the notion of fairness has been one of the most extensively used notion to evaluate allocations on an ethical basis. Whereas thereis an extensive literature on the efficiency properties of allocations in economies with uncertainty the concept of an envy-free allocation has not been widely studied in economies with uncertainty. We introduce two very natural notions of equity in an economy under uncertainty, namely ex ante and ex post equity, show they can contradict efficiency requirements. In particular, the set of ex ante efficient and ex post envy-free allocations may be empty. We nevertheless show that, under special circumstances, one may prove the existence of allocations that are both ex ante efficient and ex post envy-free. Such is the case, in particular, in an economy with individual risk and no aggregate risk.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 4 (2002)
Issue (Month): 18 ()
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Other versions of this item:
- Thibault Gajdos & Jean-Marc Tallon, 2002. "Fairness under Uncertainty," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00086032, HAL.
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- Geoffroy de Clippel, 2004. "Equity, Envy and Efficiency under Asymmetric Information," Working Papers 2004-19, Brown University, Department of Economics.
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