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Monotonicity of social welfare optima

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  • Hougaard, Jens Leth
  • Østerdal, Lars Peter

Abstract

This paper considers the problem of maximizing social welfare subject to participation constraints. It is shown that for an income allocation method that maximizes a social welfare function there is a monotonic relationship between the incomes allocated to individual agents in a given coalition (with at least three members) and its participation constraint if and only if the aggregate income to that coalition is always maximized. An impossibility result demonstrates that there is no welfare maximizing allocation method in which agents' individual incomes monotonically increase in society's income. Thus, for any such allocation method, there are situations where some agents have incentives to prevent society in becoming richer.

Suggested Citation

  • Hougaard, Jens Leth & Østerdal, Lars Peter, 2010. "Monotonicity of social welfare optima," Games and Economic Behavior, Elsevier, vol. 70(2), pages 392-402, November.
    • Handle: RePEc:eee:gamebe:v:70:y:2010:i:2:p:392-402
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    References listed on IDEAS

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    Cited by:

    1. Peter Knudsen & Lars Østerdal, 2012. "Merging and splitting in cooperative games: some (im)possibility results," International Journal of Game Theory, Springer;Game Theory Society, vol. 41(4), pages 763-774, November.

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