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Pareto efficiency in the jungle

Author

Listed:
  • Harold Houba

    () (Vrije Universiteit Amsterdam)

  • Roland Iwan Luttens

    () (Vrije Universiteit Amsterdam)

  • Hans-Peter Weikard

    () (Wageningen University)

Abstract

Abstract We revisit the jungle economy of Piccione and Rubinstein (Econ J 117(July):883–896, 2007) in which the allocation of resources is driven by coercion. In this economy the unique equilibrium satisfies lexicographic maximization. We show that relaxing the assumptions on consumption sets and preferences slightly, allocations other than lexicographic maximizers can be jungle equilibria. We attribute this result to single unilateral taking where a stronger agent takes goods from only one weaker agent. Once multiple unilateral takings are introduced, we show that jungle equilibria coincide with lexicographic maximization under weak assumptions. However, we also present examples of equilibria that are Pareto inefficient, where voluntary gift giving by stronger agents is needed to achieve Pareto efficiency and even voluntary trade has a role in the jungle.

Suggested Citation

  • Harold Houba & Roland Iwan Luttens & Hans-Peter Weikard, 2017. "Pareto efficiency in the jungle," Review of Economic Design, Springer;Society for Economic Design, vol. 21(3), pages 153-161, September.
  • Handle: RePEc:spr:reecde:v:21:y:2017:i:3:d:10.1007_s10058-017-0199-3
    DOI: 10.1007/s10058-017-0199-3
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    References listed on IDEAS

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    1. Michele Piccione & Ariel Rubinstein, 2007. "Equilibrium in the Jungle," Economic Journal, Royal Economic Society, vol. 117(522), pages 883-896, July.
    2. Emanuela Randon & Peter Simmons, 2017. "A top dog tale with preference complementarities," Journal of Economics, Springer, vol. 120(1), pages 47-63, January.
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    Cited by:

    1. Joshua S. Gans, 2018. "Self-Regulating Artificial General Intelligence," NBER Working Papers 24352, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Power; Coercion; Jungle economy; Pareto efficiency; Gift giving; Trade;

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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