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Efficiency in the cake-eating problem with quasi-geometric discounting

Author

Listed:
  • Juan Carlos Chavez-Martin del Campo

    () (Guanajuato School of Economics, Universidad de Guanajuato)

Abstract

This paper shows that any equilibrium allocation in the cake-eating problem with quasi-geometric discounting is not Pareto efficient. However, efficiency can be established by introducing a planner who controls the initial endowment and makes transfers over time. It is shown than any Pareto efficient allocation can be supported by a perfect equilibrium with transfers.

Suggested Citation

  • Juan Carlos Chavez-Martin del Campo, 2007. "Efficiency in the cake-eating problem with quasi-geometric discounting," Economics Bulletin, AccessEcon, vol. 4(43), pages 1-8.
  • Handle: RePEc:ebl:ecbull:eb-07d90006
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    References listed on IDEAS

    as
    1. Goldman, Steven Marc, 1979. "Intertemporally Inconsistent Preferences and the Rate of Consumption," Econometrica, Econometric Society, vol. 47(3), pages 621-626, May.
    2. Rabin, Matthew, 2000. "Inference by Believers in the Law of Small Numbers," Department of Economics, Working Paper Series qt4sw8n41t, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    3. Bezalel Peleg & Menahem E. Yaari, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 391-401.
    4. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, pages 351-401.
    5. Ted O'Donoghue & Matthew Rabin, 2001. "Choice and Procrastination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 121-160.
    6. Jonathan Gruber & Botond Köszegi, 2001. "Is Addiction "Rational"? Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1261-1303.
    7. Steven M. Goldman, 1980. "Consistent Plans," Review of Economic Studies, Oxford University Press, vol. 47(3), pages 533-537.
    8. Jay Bhattacharya & Darius Lakdawalla, 2004. "Time-Inconsistency and Welfare," NBER Working Papers 10345, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Pareto efficiency;

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D6 - Microeconomics - - Welfare Economics

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