Share the Gain, Share the Pain? Almost Transferable Utility, Changes in Production Possibilities, and Bargaining Solutions

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Share the Gain, Share the Pain? Almost Transferable Utility, Changes in Production Possibilities, and Bargaining Solutions

Author Info

Elisabeth Gugl () (Department of Economics, University of Victoria)

Abstract

Consider a two-person economy in which allocative efficiency is independent of distribution but the cardinal properties of the agents' utility functions precludes transferable utility (a property I call “Almost TU”). I show that Almost TU is a necessary and sufficient condition for both agents to either benefit or to lose with any change in production possibilities under generalized utilitarian bargaining solutions (of which the Nash Bargaining solution is a special case) and under the Kalai-Smorodinsky solution. I apply the result to household decision-making in the context of the Rotten Kid Theorem and discuss other applications.

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Paper provided by Department of Economics, University of Victoria in its series Department Discussion Papers with number 0705.

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Length: 14 pages
Date of creation: 02 Nov 2007
Date of revision:
Handle: RePEc:vic:vicddp:0705

Note: ISSN 1914-2838
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Find related papers by JEL classification:
C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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Bergstrom, Theodore C. & Cornes, Richard C., 1981. "Gorman and Musgrave are dual : An Antipodean theorem on public goods," Economics Letters, Elsevier, vol. 7(4), pages 371-378. [Downloadable!] (restricted)
Other versions:
- Ted Bergstrom & Richard Cornes, 1981. "Gorman and Musgrave are Dual: An Antipodean Theorem on Public Goods," University of California at Santa Barbara, Economics Working Paper Series 1981B, Department of Economics, UC Santa Barbara. [Downloadable!]
Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec.. [Downloadable!] (restricted)
Bergstrom, Theodore C. & Varian, Hal R., 1985. "When do market games have transferable utility?," Journal of Economic Theory, Elsevier, vol. 35(2), pages 222-233, August. [Downloadable!] (restricted)
Other versions:
- Ted Bergstrom & Hal Varian, 1985. "When Do Market Games Have Transferable Utility?," University of California at Santa Barbara, Economics Working Paper Series 1985A, Department of Economics, UC Santa Barbara. [Downloadable!]
Ted Bergstrom & Richard Cornes, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," University of California at Santa Barbara, Economics Working Paper Series 1983B, Department of Economics, UC Santa Barbara. [Downloadable!]
Other versions:
- Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, vol. 51(6), pages 1753-65, November. [Downloadable!] (restricted)
Pierre-André Chiappori & Bernard Fortin & Guy Lacroix, 2001. "Marriage Market, Divorce Legislation and Household Labor Supply," CIRANO Working Papers 2001s-16, CIRANO. [Downloadable!]
Other versions:
- Chiappori, Pierre-André & Fortin, Bernard & Lacroix, Guy, 2001. "Marriage Market, Divorce Legislation and Household Labor Supply," Cahiers de recherche 0103, Université Laval - Département d'économique. [Downloadable!]
- Pierre-Andre Chiappori & Bernard Fortin & Guy Lacroix, 2002. "Marriage Market, Divorce Legislation, and Household Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 37-72, February. [Downloadable!] (restricted)
Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-59, October. [Downloadable!] (restricted)
Other versions:
- Ted Bergstrom, 1989. "A Fresh Look at the Rotten Kid Theorem--And Other Household Mysteries," University of California at Santa Barbara, Economics Working Paper Series 1989A, Department of Economics, UC Santa Barbara. [Downloadable!]

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