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Implications of Pareto Efficiency for two-agent (household) choice

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  • Echenique, Federico
  • Ivanov, Lozan

Abstract

Abstract We study when two-member household choice behavior is compatible with Pareto optimality. We ask when an external observer of household choices, who does not know the individuals' preferences, can rationalize the choices as being Pareto-optimal. Our main contribution is to reduce the problem of rationalization to a graph-coloring problem. As a result, we obtain simple tests for Pareto optimal choice behavior. In addition to the tests, and using our graph-theoretic representation, we show that Pareto rationalization is equivalent to a system of quadratic equations being solvable.
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Suggested Citation

  • Echenique, Federico & Ivanov, Lozan, "undated". "Implications of Pareto Efficiency for two-agent (household) choice," Working Papers 1308, California Institute of Technology, Division of the Humanities and Social Sciences.
  • Handle: RePEc:clt:sswopa:1308
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    References listed on IDEAS

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    1. Moulin,Hervi, 1991. "Axioms of Cooperative Decision Making," Cambridge Books, Cambridge University Press, number 9780521424585.
    2. Sprumont, Yves, 2001. "Paretian Quasi-orders: The Regular Two-Agent Case," Journal of Economic Theory, Elsevier, vol. 101(2), pages 437-456, December.
    3. Sprumont, Yves, 2000. "On the Testable Implications of Collective Choice Theories," Journal of Economic Theory, Elsevier, vol. 93(2), pages 205-232, August.
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    Cited by:

    1. Sam Cosaert & Thomas Demuynck, 2015. "Revealed preference theory for finite choice sets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(1), pages 169-200, May.
    2. Lee, SangMok, 2012. "The testable implications of zero-sum games," Journal of Mathematical Economics, Elsevier, vol. 48(1), pages 39-46.
    3. Shaofang Qi, 2016. "A characterization of the n-agent Pareto dominance relation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(3), pages 695-706, March.
    4. Thomas Demuynck, 2014. "The computational complexity of rationalizing Pareto optimal choice behavior," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(3), pages 529-549, March.
    5. Jerry S. Kelly & Shaofang Qi, 2016. "A conjecture on the construction of orderings by Borda’s rule," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(1), pages 113-125, June.
    6. Qi, Shaofang, 2015. "Paretian partial orders: The two-agent case," Journal of Mathematical Economics, Elsevier, vol. 57(C), pages 38-48.

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