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Market arbitrage, social choice and the core

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  • Graciela Chichilnisky

    (Program on Information and Resources, Columbia University, 405 Low Memorial Library, New York, NY 10027, USA)

Abstract

This paper establishes a clear connection between equilibrium theory, game theory and social choice theory by showing that, for a well defined social choice problem, a condition which is necessary and sufficient to solve this problem - limited arbitrage - is the same as the condition which is necessary and sufficient to establish the existence of an equilibrium and the core. The connection is strengthened by establishing that a market allocation, which is in the core, can always be realized as a social allocation, i.e. an allocation which is optimal according to an ordering chosen by a social choice rule. Limited arbitrage characterizes those economies without Condorcet triples, and those for which Arrow's paradox can be resolved on choices of large utility values.

Suggested Citation

  • Graciela Chichilnisky, 1997. "Market arbitrage, social choice and the core," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 14(2), pages 161-198.
    • Handle: RePEc:spr:sochwe:v:14:y:1997:i:2:p:161-198
    Note: Received: 30 December 1994/Accepted: 12 August 1996
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    Cited by:

    1. Norman Schofield, 2015. "Climate Change, Collapse and Social Choice Theory," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 9(1), pages 007-035, October.
    2. Chichilnisky, Graciela, 1997. "Limited arbitrage is necessary and sufficient for the existence of an equilibrium," Journal of Mathematical Economics, Elsevier, vol. 28(4), pages 470-479, November.

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