Egalitarian-equivalence and the Pareto principle for social preferences
AbstractWhen we construct social preferences, the Pareto principle is often in conflict with the equity criteria: there exist two allocations x and y such that x Pareto dominates y, but y is an equitable allocation whereas x is not. The efficiency-first principle requires to rank an allocation x higher than y if (i) x Pareto dominates y or (ii) x and y are Pareto-noncomparable and x is equitable whereas y is not. The equity-first principle reverses the order of application of the two criteria. Adopting egalitarian-equivalence as the notion of equity, we examine rationality of the social preference functions based on the efficiency-first or the equity-first principle. The degrees of rationality vary widely depending on which principle is adopted, and depending on the range of egalitarian-reference bundles. We show several impossibility and possibility results as well as a characterization of the social preference function introduced by Pazner and Schmeidler (1978). We also identify the sets of maximal allocations of the social preference relations in an Edgeworth box. The results are contrasted with those in the case where no-envy is the notion of equity.
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Bibliographic InfoArticle provided by Springer in its journal Social Choice and Welfare.
Volume (Year): 24 (2005)
Issue (Month): 3 (06)
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Other versions of this item:
- Tadenuma, Koichi, 2002. "Egalitarian-Equivalence and the Pareto Principle for Social Preferences," Discussion Papers 2002-08, Graduate School of Economics, Hitotsubashi University.
- Tadenuma, Koichi, 2002. "Egalitarian-Equivalence and the Pareto Principle for Social Preferences," Discussion Paper 128, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
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