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The consistency of welfare judgments with a representative consumer

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  • Dow, James
  • da Costa Werlang, Sergio Ribeiro

Abstract

This paper is about economies with a representative consumer. In general a representative consumer need not exist, although there are several well known sets of sufficient conditions under which Qne will. It is common practice, however, to use the representative consumer hypothesis without specifically assuming any of these. We show, firstly, that it is possible for the utility of the representative consumer to increase when every actual consumer is made worse off. This shows a serious shortcoming of welfare judgements based on the representatíve consumer. Secondly, in economies where this does not occur, there exists a social welfare function, which we construct, which is consistent with welfare judgements based on the utility of the representative consumer. Finally we provide a converse to Samuelson' s 1956 representative consumer result, which relates it to Scitovsky's community indifference curves.
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Suggested Citation

  • Dow, James & da Costa Werlang, Sergio Ribeiro, 1988. "The consistency of welfare judgments with a representative consumer," Journal of Economic Theory, Elsevier, vol. 44(2), pages 269-280, April.
  • Handle: RePEc:eee:jetheo:v:44:y:1988:i:2:p:269-280
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    Cited by:

    1. Laurens Cherchye & Ian Crawford & Bram Rock & Frederic Vermeulen, 2016. "Gorman revisited: nonparametric conditions for exact linear aggregation," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(2), pages 203-220, June.
    2. Laurens CHERCHYE & Ian CRAWFORD & Bram DE ROCK & Frederic VERMEULEN, 2011. "Aggregation without the aggravation? Nonparametric analysis of the representative consumer," Working Papers Department of Economics ces11.36, KU Leuven, Faculty of Economics and Business, Department of Economics.
    3. Chambers, Christopher P., 2012. "Inequality aversion and risk aversion," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1642-1651.
    4. Edward E. Schlee, 2001. "The Value of Information in Efficient Risk-Sharing Arrangements," American Economic Review, American Economic Association, vol. 91(3), pages 509-524, June.
    5. Rachmilevitch, Shiran, 2016. "Social objectives in general equilibrium," Economics Letters, Elsevier, vol. 148(C), pages 99-102.
    6. Laurens Cherchye & Ian Crawford & Bram De Rock & Frederic Vermeulen, 2015. "Revealed Preference and Aggregation," Working Papers ECARES ECARES 2015-08, ULB -- Universite Libre de Bruxelles.
    7. Jerison, Michael, 1997. "Nonrepresentative representative consumers," UC3M Working papers. Economics 4137, Universidad Carlos III de Madrid. Departamento de Economía.

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