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

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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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Bibliographic Info

Paper provided by Department of Economics, University of Victoria in its series Department Discussion Papers with number 0903.

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Length: 23 pages
Date of creation: 22 Aug 2009
Date of revision:
Handle: RePEc:vic:vicddp:0903

Note: ISSN 1914-2838
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Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2
Phone: (250)721-6197
Fax: (250)721-6214
Web page: http://web.uvic.ca/econ
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Keywords: Axiomatic bargaining; Solidarity; Transferable utility; Family taxation; Rotten Kid Theorem;

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  8. Nicolo, Antonio & Perea, Andres, 2005. "Monotonicity and equal-opportunity equivalence in bargaining," Mathematical Social Sciences, Elsevier, vol. 49(2), pages 221-243, March.
  9. Matthias Wrede, 2003. "The Income Splitting Method: Is it Good for Both Marriage Partners?," German Economic Review, Verein für Socialpolitik, vol. 4(2), pages 203-216, 05.
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  13. Rubinstein, Ariel & Safra, Zvi & Thomson, William, 1992. "On the Interpretation of the Nash Bargaining Solution and Its Extension to Non-expected Utility Preferences," Econometrica, Econometric Society, vol. 60(5), pages 1171-86, September.
  14. Anbarci, Nejat & Skaperdas, Stergios & Syropoulos, Constantinos, 2002. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects," Journal of Economic Theory, Elsevier, vol. 106(1), pages 1-16, September.
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  16. Yongsheng Xu & Naoki Yoshihara, 2008. "The Behaviour Of Solutions To Bargaining Problems On The Basis Of Solidarity," The Japanese Economic Review, Japanese Economic Association, vol. 59(1), pages 133-138.
  17. Chun, Youngsub & Thomson, William, 1988. "Monotonicity properties of bargaining solutions when applied to economics," Mathematical Social Sciences, Elsevier, vol. 15(1), pages 11-27, February.
  18. Gerber, Anke & Upmann, Thorsten, 2006. "Bargaining solutions at work: Qualitative differences in policy implications," Mathematical Social Sciences, Elsevier, vol. 52(2), pages 162-175, September.
  19. Elisabeth Gugl, 2009. "Income splitting, specialization, and intra-family distribution," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 1050-1071, August.
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  21. 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.
  22. Moulin,Hervi, 1991. "Axioms of Cooperative Decision Making," Cambridge Books, Cambridge University Press, number 9780521424585, October.
  23. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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