Twofold optimality of the relative utilitarian bargaining solution
Given a bargaining problem, the `relative utilitarian' (RU) solution maximizes the sum total of the bargainer's utilities, after having first renormalized each utility function to range from zero to one. We show that RU is `optimal' in two very different senses. First, RU is the maximal element (over the set of all bargaining solutions) under any partial ordering which satisfies certain axioms of fairness and consistency; this result is closely analogous to the result of Segal (2000). Second, RU offers each person the maximum expected utility amongst all rescaling-invariant solutions, when it is applied to a random sequence of future bargaining problems which are generated using a certain class of distributions; this is somewhat reminiscent of the results of Harsanyi (1953) and Karni (1998).
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Volume (Year): 32 (2009)
Issue (Month): 1 (January)
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- Edi Karni, 2003. "Impartiality and interpersonal comparisons of variations in well-being," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 21(1), pages 95-111, 08.
- Amrita Dhillon & Jean-Francois Mertens, 1999.
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- DHILLON, Amrita & MERTENS, Jean-François, "undated". "Relative utilitarianism," CORE Discussion Papers RP 1398, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- Uzi Segal, 2000. "Let's Agree That All Dictatorships Are Equally Bad," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 569-589, June.
- John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434-434.
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- Amrita Dhillon, 1998. "Extended Pareto rules and relative utilitarianism," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(4), pages 521-542.
- John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309-309. Full references (including those not matched with items on IDEAS)
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