Reversal Of Misfortune When Providing For Adversity
Often an economic agent dissatisfied with an endowed distribution of utilities desires to optimize this distribution by transferring income or resources across individuals or states of the world. This multi-state optimization theme recurs in a wide variety of economic contexts, ranging across taxation and income distribution, international trade and market disruption, labor contracts and unemployment insurance, Rawlsian design of social contracts, provision for retirement, and many others. Because analyses of such topics are frequently so context driven, the generality of this theme seems to have gone unnoticed and, of a particular paradoxical result, unappreciated. One example of this paradox is how lump-sum distribution in a first best environment will reverse the preference rankings of the endowed distribution of utilities - after redistribution the originally 'bad' outcomes become preferred to originally better ones. Or as another example, if fair insurance is available, the rational resource owner will buy so much insurance that the otherwise 'bad' contingency becomes preferred. This paper examines the underlying structure common to such contexts.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 17 (2006)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/GDPE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/GDPE20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hirshleifer, Jack, 1987. "Economic Behaviour in Adversity," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226342825.
- McGuire, Martin C & Pratt, John & Zeckhauser, Richard, 1991. " Paying to Improve Your Chances: Gambling or Insurance?," Journal of Risk and Uncertainty, Springer, vol. 4(4), pages 329-38, December.
- Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug..
- Shavell, Steven & Weiss, Laurence, 1979.
"The Optimal Payment of Unemployment Insurance Benefits over Time,"
Journal of Political Economy,
University of Chicago Press, vol. 87(6), pages 1347-62, December.
- Steven Shavell & Laurence Weiss, 1978. "The Optimal Payment of Unemployment Insurance Benefits over Time," Cowles Foundation Discussion Papers 503, Cowles Foundation for Research in Economics, Yale University.
When requesting a correction, please mention this item's handle: RePEc:taf:defpea:v:17:y:2006:i:6:p:619-643. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.