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Efficiency in the cake-eating problem with quasi-geometric discounting

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  • Juan Carlos Chavez-Martin del Campo

    ()
    (Guanajuato School of Economics, Universidad de Guanajuato)

Abstract

This paper shows that any equilibrium allocation in the cake-eating problem with quasi-geometric discounting is not Pareto efficient. However, efficiency can be established by introducing a planner who controls the initial endowment and makes transfers over time. It is shown than any Pareto efficient allocation can be supported by a perfect equilibrium with transfers.

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File URL: http://www.accessecon.com/pubs/EB/2007/Volume4/EB-07D90006A.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 4 (2007)
Issue (Month): 43 ()
Pages: 1-8

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Handle: RePEc:ebl:ecbull:eb-07d90006

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Keywords: Pareto efficiency;

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  1. Jonathan Gruber & Botond Köszegi, 2001. "Is Addiction "Rational"? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1261-1303, November.
  2. Ted O'Donoghue & Matthew Rabin, 2001. "Choice And Procrastination," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 121-160, February.
  3. Peleg, Bezalel & Yaari, Menahem E, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 391-401, July.
  4. Goldman, Steven Marc, 1979. "Intertemporally Inconsistent Preferences and the Rate of Consumption," Econometrica, Econometric Society, vol. 47(3), pages 621-26, May.
  5. Goldman, Steven M, 1980. "Consistent Plans," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 533-37, April.
  6. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
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