IDEAS home Printed from https://ideas.repec.org/p/bro/econwp/2010-4.html
   My bibliography  Save this paper

Copmment on Egalitarianism under Incomplete Information

Author

Abstract

The paper aims at extending the egalitarian principle to environments with incomplete information. The approach is primarily axiomatic, focusing on the characteristic property of monotonicity: no member of the society should be worse off when more collective decisions are available. I start by showing the incompat- ibility of this property with incentive efficiency, even in quasi-linear environments. This serious impossibility result does not follow from the mere presence of incentive constraints, but instead from the fact that information is incomplete (asymmetric information at the time of making a decision). I then weaken the monotonicity property so as to require it only when starting from incentive compatible mecha- nisms at which interim utilities are transferable (in a weak sense). Adding other axioms in the spirit of Kalai's (Econometrica, 1977, Theorem 1) classical character- ization of the egalitarian principle under complete information, I obtain a partial characterization of a natural extension of the lex-min solution to problems with incomplete information. Next, I prove that, in each social choice problem, there is a unique way of rescaling the participants' interim utilities so as to make this solu- tion compatible with the ex-ante utilitarian principle. These two criteria coincides in the rescaled utilities exactly at the incentive ecient mechanisms that maxi- mize Harsanyi and Selten's (Management Science, 1972) weighted Nash product. These concepts are illustrated on classical examples of profit-sharing, public good production and bilateral trade. The richness of the topic of social choice under in- complete information is illustrated by considering two alternative extensions of the egalitarian principle { one based on an idea of equity from the point of view of the individuals themselves (given their private information) instead of an uninformed third party (social planner or arbitrator), and another notion based on the idea of

Suggested Citation

  • Geoffroy de Clippel, 2010. "Copmment on Egalitarianism under Incomplete Information," Working Papers 2010-4, Brown University, Department of Economics.
  • Handle: RePEc:bro:econwp:2010-4
    as

    Download full text from publisher

    File URL: http://www.brown.edu/academics/economics/sites/brown.edu.academics.economics/files/uploads/2010-4_paper.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. de Clippel, Geoffroy, 2005. "Values for cooperative games with incomplete information: An eloquent example," Games and Economic Behavior, Elsevier, vol. 53(1), pages 73-82, October.
    2. Myerson, Roger B, 1983. "Mechanism Design by an Informed Principal," Econometrica, Econometric Society, vol. 51(6), pages 1767-1797, November.
    3. Moulin, Herve & Thomson, William, 1988. "Can everyone benefit from growth? : Two difficulties," Journal of Mathematical Economics, Elsevier, vol. 17(4), pages 339-345, September.
    4. de Clippel, Geoffroy & Minelli, Enrico, 2004. "Two-person bargaining with verifiable information," Journal of Mathematical Economics, Elsevier, vol. 40(7), pages 799-813, November.
    5. Aumann, Robert J., 2003. "Presidential address," Games and Economic Behavior, Elsevier, vol. 45(1), pages 2-14, October.
    6. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    7. Moulin, Herve, 1985. "Egalitarianism and Utilitarianism in Quasi-linear Bargaining," Econometrica, Econometric Society, vol. 53(1), pages 49-67, January.
    8. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-1819, November.
    9. Wilson, Robert B, 1978. "Information, Efficiency, and the Core of an Economy," Econometrica, Econometric Society, vol. 46(4), pages 807-816, July.
    10. SPRUMONT, Yves, 2009. "Relative Egalitarianism and Related Criteria," Cahiers de recherche 2009-02, Universite de Montreal, Departement de sciences economiques.
    11. Kalai, Ehud, 1977. "Proportional Solutions to Bargaining Situations: Interpersonal Utility Comparisons," Econometrica, Econometric Society, vol. 45(7), pages 1623-1630, October.
    12. Feldman, Allan M & Kirman, Alan, 1974. "Fairness and Envy," American Economic Review, American Economic Association, vol. 64(6), pages 995-1005, December.
    13. de Clippel, Geoffroy & Pérez-Castrillo, David & Wettstein, David, 2012. "Egalitarian equivalence under asymmetric information," Games and Economic Behavior, Elsevier, vol. 75(1), pages 413-423.
    14. Myerson, Roger B, 1984. "Two-Person Bargaining Problems with Incomplete Information," Econometrica, Econometric Society, vol. 52(2), pages 461-487, March.
    15. Young, H Peyton, 1985. "Producer Incentives in Cost Allocation," Econometrica, Econometric Society, vol. 53(4), pages 757-765, July.
    16. Imai, Haruo, 1983. "Individual Monotonicity and Lexicographic Maxmin Solution," Econometrica, Econometric Society, vol. 51(2), pages 389-401, March.
    17. de Clippel, Geoffroy & Bejan, Camelia, 2011. "No profitable decompositions in quasi-linear allocation problems," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1995-2012, September.
    18. Elisha A. Pazner & David Schmeidler, 1978. "Egalitarian Equivalent Allocations: A New Concept of Economic Equity," The Quarterly Journal of Economics, Oxford University Press, vol. 92(4), pages 671-687.
    19. de Clippel, Geoffroy, 2007. "The type-agent core for exchange economies with asymmetric information," Journal of Economic Theory, Elsevier, vol. 135(1), pages 144-158, July.
    20. Olszewski, Wojciech, 2004. "Coalition strategy-proof mechanisms for provision of excludable public goods," Games and Economic Behavior, Elsevier, vol. 46(1), pages 88-114, January.
    21. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    22. Weidner, Frank, 1992. "The Generalized Nash Bargaining Solution and Incentive Compatible Mechanisms," International Journal of Game Theory, Springer;Game Theory Society, vol. 21(2), pages 109-129.
    23. Moulin, Herve, 1992. "An Application of the Shapley Value to Fair Division with Money," Econometrica, Econometric Society, vol. 60(6), pages 1331-1349, November.
    24. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
    25. Maniquet, François & Sprumont, Yves, 2010. "Sharing the cost of a public good: An incentive-constrained axiomatic approach," Games and Economic Behavior, Elsevier, vol. 68(1), pages 275-302, January.
    26. John C. Harsanyi & Reinhard Selten, 1972. "A Generalized Nash Solution for Two-Person Bargaining Games with Incomplete Information," Management Science, INFORMS, vol. 18(5-Part-2), pages 80-106, January.
    27. Postlewaite, Andrew & Schmeidler, David, 1986. "Implementation in differential information economies," Journal of Economic Theory, Elsevier, vol. 39(1), pages 14-33, June.
    28. Thomson, William, 1983. "Problems of fair division and the Egalitarian solution," Journal of Economic Theory, Elsevier, vol. 31(2), pages 211-226, December.
    29. Varian, Hal R., 1974. "Equity, envy, and efficiency," Journal of Economic Theory, Elsevier, vol. 9(1), pages 63-91, September.
    30. Geoffroy de Clippel, 2010. "Copmment on "The Veil of Public Ignorance"," Working Papers 2010-3, Brown University, Department of Economics.
    31. Moulin, Hervé, 2009. "Almost budget-balanced VCG mechanisms to assign multiple objects," Journal of Economic Theory, Elsevier, vol. 144(1), pages 96-119, January.
    32. Guo, Mingyu & Conitzer, Vincent, 2009. "Worst-case optimal redistribution of VCG payments in multi-unit auctions," Games and Economic Behavior, Elsevier, vol. 67(1), pages 69-98, September.
    33. Hervé Moulin, 1994. "Serial Cost-Sharing of Excludable Public Goods," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 305-325.
    34. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January.
    35. Nehring, Klaus, 2004. "The veil of public ignorance," Journal of Economic Theory, Elsevier, vol. 119(2), pages 247-270, December.
    36. Kalai, Ehud & Samet, Dov, 1985. "Monotonic Solutions to General Cooperative Games," Econometrica, Econometric Society, vol. 53(2), pages 307-327, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. de Clippel, Geoffroy & Pérez-Castrillo, David & Wettstein, David, 2012. "Egalitarian equivalence under asymmetric information," Games and Economic Behavior, Elsevier, vol. 75(1), pages 413-423.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bro:econwp:2010-4. 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: (Brown Economics Webmaster). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.