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Egalitarian-Equivalence and the Pareto Principle for Social Preferences

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  • Tadenuma, Koichi

Abstract

When 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 Info

Paper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series Discussion Paper with number 128.

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Length: 18 p.
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:hit:piedp1:128

Note: This version: September 2002; First version: July 2002
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Cited by:
  1. Houy, Nicolas & Tadenuma, Koichi, 2009. "Lexicographic compositions of multiple criteria for decision making," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1770-1782, July.
  2. Ludovic Renou & Karl H. Schlag, 2009. "From Ordients to Optimization: Substitution Effects without Differentiability," Discussion Papers in Economics 09/6, Department of Economics, University of Leicester.
  3. Houy, Nicolas, 2011. "A refinement of prudent choices," Mathematical Social Sciences, Elsevier, vol. 61(3), pages 166-169, May.
  4. Houy, Nicolas, 2008. "A note on the Suzumura-consistency," Mathematical Social Sciences, Elsevier, vol. 55(1), pages 90-95, January.
  5. Matsuki, Jun & Tadenuma, Koichi, 2013. "Choice via Grouping Procedures," Discussion Papers 2013-08, Graduate School of Economics, Hitotsubashi University.
  6. Marc Fleurbaey, 2004. "Two Criteria for Social Decisions," Economics Papers 2004-W27, Economics Group, Nuffield College, University of Oxford.
  7. Nicolas Houy, 2008. "A refinement of prudent choices," Working Papers hal-00360523, HAL.
  8. Yukihiro Nishimura, 2008. "Fair Collective Choice Rules: Their Origin and Relationship," Working Papers 1179, Queen's University, Department of Economics.
  9. Nicolas Houy, 2008. "Prudent choices and rationality," Working Papers hal-00360518, HAL.
  10. Thomson, William, 2011. "Chapter Twenty-One - Fair Allocation Rules," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 2, chapter 21, pages 393-506 Elsevier.

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