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Characterising competitive equilibrium in terms of opportunity

Listed author(s):
  • Robert Sugden

    ()

    (University of East Anglia, UK)

This paper is the first draft of a technical appendix to a chapter of a book I am writing, with the provisional title The Community of Advantage. The central argument of the book will be that many elements of the (classically) liberal tradition of normative economics do not depend on assumptions about individual rationality, and so it is possible for a behavioural economist to work in that tradition. I will propose an approach to normative economics that differs both from neoclassical welfare economics and from the various variants of soft paternalism that are currently being proposed by behavioural economists. My approach has two distinctive features. First, it is written from a contractarian perspective. That is, it is addressed to citizens as potential parties to mutually beneficial agreements, and not to an imagined benevolent despot or social planner. (A first draft of this part of the argument has been published as Sugden [2013].) Second, its normative criterion is opportunity, not welfare, happiness or well-being. Sections 1 to 4 of this paper follow the analysis in McQuillin and Sugden (2012), specialised to the one-period case and with minor changes in notation. The set-up, and the definition of the ‘opportunity criterion’ are slightly different from those used in Sugden (2004). The differences are explained in McQuillin and Sugden (2012). The argument in Section 5 is new.

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File URL: http://www.chapman.edu/research-and-institutions/economic-science-institute/_files/WorkingPapers/Sugden-characterising-competitive-equilibrium-in-terms-of-opportunity.pdf
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Paper provided by Chapman University, Economic Science Institute in its series Working Papers with number 14-02.

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Length: 25 pages
Date of creation: 2014
Handle: RePEc:chu:wpaper:14-02
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  1. Robert Sugden, 2004. "The Opportunity Criterion: Consumer Sovereignty Without the Assumption of Coherent Preferences," American Economic Review, American Economic Association, vol. 94(4), pages 1014-1033, September.
  2. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803-843.
  3. Ben McQuillin & Robert Sugden, 2012. "How the market responds to dynamically inconsistent preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 38(4), pages 617-634, April.
  4. Andrea Isoni, 2011. "The willingness-to-accept/willingness-to-pay disparity in repeated markets: loss aversion or ‘bad-deal’ aversion?," Theory and Decision, Springer, vol. 71(3), pages 409-430, September.
  5. Yuval Salant & Ariel Rubinstein, 2008. "(A, f): Choice with Frames -super-1," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1287-1296.
  6. Gerardo Infante & Guilhem Lecouteux & Robert Sugden, 2016. "Preference purification and the inner rational agent: a critique of the conventional wisdom of behavioural welfare economics," Journal of Economic Methodology, Taylor & Francis Journals, vol. 23(1), pages 1-25, March.
  7. Matthew Rabin, 2013. "Incorporating Limited Rationality into Economics," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 528-543, June.
  8. Kreps, David M, 1979. "A Representation Theorem for "Preference for Flexibility"," Econometrica, Econometric Society, vol. 47(3), pages 565-577, May.
  9. Cass R. Sunstein & Richard H. Thaler, 2003. "Libertarian paternalism is not an oxymoron," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 48(Jun).
  10. Prasanta K. PATTANAIK & Yongsheng XU, 1990. "On Ranking Opportunity Sets in Terms of Freedom of Choice," Discussion Papers (REL - Recherches Economiques de Louvain) 1990036, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  11. B. Douglas Bernheim & Antonio Rangel, 2009. "Beyond Revealed Preference: Choice-Theoretic Foundations for Behavioral Welfare Economics," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 51-104.
  12. Jones, Peter & Sugden, Robert, 1982. "Evaluating choice," International Review of Law and Economics, Elsevier, vol. 2(1), pages 47-65, June.
  13. Edgeworth, Francis Ysidro, 1881. "Mathematical Psychics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number edgeworth1881.
  14. Matthew Rabin & Botond Kőszegi, 2007. "Mistakes in Choice-Based Welfare Analysis," American Economic Review, American Economic Association, vol. 97(2), pages 477-481, May.
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