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Universal Pareto dominance and welfare for plausible utility functions

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  • Aziz, Haris
  • Brandl, Florian
  • Brandt, Felix

Abstract

We study Pareto efficiency in a setting that involves two kinds of uncertainty: Uncertainty over the possible outcomes is modeled using lotteries whereas uncertainty over the agents’ preferences over lotteries is modeled using sets of plausible utility functions. A lottery is universally Pareto undominated if there is no other lottery that Pareto dominates it for all plausible utility functions. We show that, under fairly general conditions, a lottery is universally Pareto undominated iff it is Pareto efficient for some vector of plausible utility functions, which in turn is equivalent to affine welfare maximization for this vector. In contrast to previous work on linear utility functions, we use the significantly more general framework of skew-symmetric bilinear (SSB) utility functions as introduced by Fishburn (1982). Our main theorem generalizes a theorem by Carroll (2010) and implies the ordinal efficiency welfare theorem. We discuss three natural classes of plausible utility functions, which lead to three notions of ordinal efficiency, including stochastic dominance efficiency, and conclude with a detailed investigation of the geometric and computational properties of these notions.

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  • Aziz, Haris & Brandl, Florian & Brandt, Felix, 2015. "Universal Pareto dominance and welfare for plausible utility functions," Journal of Mathematical Economics, Elsevier, vol. 60(C), pages 123-133.
    • Handle: RePEc:eee:mateco:v:60:y:2015:i:c:p:123-133
    DOI: 10.1016/j.jmateco.2015.06.014
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    Cited by:

    1. Haris Aziz, 2017. "Characterizing SW-Efficiency in the Social Choice Domain," Economics Bulletin, AccessEcon, vol. 37(1), pages 48-51.
    2. Brandl, Florian & Brandt, Felix & Greger, Matthias & Peters, Dominik & Stricker, Christian & Suksompong, Warut, 2022. "Funding public projects: A case for the Nash product rule," Journal of Mathematical Economics, Elsevier, vol. 99(C).
    3. Brandl, Florian & Brandt, Felix & Suksompong, Warut, 2016. "The impossibility of extending random dictatorship to weak preferences," Economics Letters, Elsevier, vol. 141(C), pages 44-47.
    4. Brandl, Florian & Brandt, Felix & Hofbauer, Johannes, 2019. "Welfare maximization entices participation," Games and Economic Behavior, Elsevier, vol. 114(C), pages 308-314.
    5. Lê Nguyên Hoang, 2017. "Strategy-proofness of the randomized Condorcet voting system," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 48(3), pages 679-701, March.
    6. Doğan, Battal & Yıldız, Kemal, 2016. "Efficiency and stability of probabilistic assignments in marriage problems," Games and Economic Behavior, Elsevier, vol. 95(C), pages 47-58.
    7. Florian Brandl & Felix Brandt, 2020. "Arrovian Aggregation of Convex Preferences," Econometrica, Econometric Society, vol. 88(2), pages 799-844, March.
    8. Christopher P Chambers & Federico Echenique, 2021. "Empirical Welfare Economics," Papers 2108.03277, arXiv.org, revised Sep 2022.
    9. Florian Brandl & Felix Brandt & Christian Stricker, 2022. "An analytical and experimental comparison of maximal lottery schemes," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 58(1), pages 5-38, January.
    10. Aziz, Haris & Brandl, Florian & Brandt, Felix & Brill, Markus, 2018. "On the tradeoff between efficiency and strategyproofness," Games and Economic Behavior, Elsevier, vol. 110(C), pages 1-18.
    11. Florian Brandl & Felix Brandt & Matthias Greger & Dominik Peters & Christian Stricker & Warut Suksompong, 2022. "Funding public projects: A case for the Nash product rule," Post-Print hal-03818329, HAL.
    12. Pištěk, Miroslav, 2018. "Continuous SSB representation of preferences," Journal of Mathematical Economics, Elsevier, vol. 77(C), pages 59-65.

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