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Share the Gain, Share the Pain? Almost Transferable Utility, changes in production possibilities, and bargaining solutions

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  • Elisabeth Gugl
  • Justin Leroux

    ()
    (IEA, HEC Montréal)

Abstract

We consider an n-person economy in which efficiency is independent of distribution but the cardinal properties of the agents’ utility functions preclude transferable utility (a property we call "Almost TU"). We show that Almost TU is a necessary and sufficient condition for all agents to either benefit jointly or suffer jointly with any change in production possibilities under well-behaved generalized utilitarian bargaining solutions (of which the Nash Bargaining and the utilitarian solutions are special cases). We apply the result to household decision making in the context of the Rotten Kid Theorem and in evaluating a change in family taxation.

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File URL: http://www.hec.ca/iea/cahiers/2009/iea0905_jleroux.pdf
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Bibliographic Info

Paper provided by HEC Montréal, Institut d'économie appliquée in its series Cahiers de recherche with number 09-05.

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Length: 25 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:iea:carech:0905

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Keywords: Axiomatic Bargaining; Solidarity; Transferable Utility; Family Taxation; Rotten Kid Theorem;

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References

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  19. Marjorie B. McElroy, 1990. "The Empirical Content of Nash-Bargained Household Behavior," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 25(4), pages 559-583.
  20. Matthias Wrede, 2003. "The Income Splitting Method: Is it Good for Both Marriage Partners?," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 4(2), pages 203-216, 05.
  21. Shelly J. Lundberg & Robert A. Pollak & Terence J. Wales, 1997. "Do Husbands and Wives Pool Their Resources? Evidence from the United Kingdom Child Benefit," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 32(3), pages 463-480.
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Cited by:
  1. Elisabeth Gugl & Linda Welling, 2012. "Time with sons and daughters," Review of Economics of the Household, Springer, Springer, vol. 10(2), pages 277-298, June.

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