IDEAS home Printed from https://ideas.repec.org/p/eca/wpaper/2013-189873.html
   My bibliography  Save this paper

The Transfer Paradox in Welfare Space

Author

Listed:
  • Thomas Demuynck
  • Bram De Rock
  • Victor Ginsburgh

Abstract

The transfer paradox describes a situation in which a transfer ofendowments between two agents results in a welfare decrease for therecipient and a welfare increase for the donor. It is known that ina two-agent regular exchange economy with an arbitrary number ofgoods, the transfer paradox occurs only if the price equilibrium isunstable. In this paper, we show that in the space of welfare weights,the set of stable equilibria and the set of no-transfer paradox equilibriacoincide. As a corollary we also obtain that for two agents and anarbitrary number of goods, the index of an equilibrium in price spacecoincides with its index in welfare space.

Suggested Citation

  • Thomas Demuynck & Bram De Rock & Victor Ginsburgh, 2015. "The Transfer Paradox in Welfare Space," Working Papers ECARES ECARES 2015-01, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/189873
    as

    Download full text from publisher

    File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/189873/1/2015-01-DEMUYNCK_DEROCK_GINSBURGH-thetransfer.pdf
    File Function: 2015-01-DEMUYNCK_DEROCK_GINSBURGH-thetransfer
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. René Brink & Gerard Laan & Valeri Vasil’ev, 2014. "Constrained core solutions for totally positive games with ordered players," International Journal of Game Theory, Springer;Game Theory Society, vol. 43(2), pages 351-368, May.
    2. Mantel, Rolf R, 1971. "The Welfare Adjustment Process: Its Stability Properties," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 12(3), pages 415-430, October.
    3. Jean Derks & Gerard Laan & Valery Vasil’ev, 2006. "Characterizations of the Random Order Values by Harsanyi Payoff Vectors," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 64(1), pages 155-163, August.
    4. Safra, Zvi, 1984. "On the frequency of the transfer paradox," Economics Letters, Elsevier, vol. 15(3-4), pages 209-212.
    5. Billot, Antoine & Thisse, Jacques-Francois, 2005. "How to share when context matters: The Mobius value as a generalized solution for cooperative games," Journal of Mathematical Economics, Elsevier, vol. 41(8), pages 1007-1029, December.
    6. Jean Derks & Gerard Laan & Valery Vasil’ev, 2010. "On the Harsanyi payoff vectors and Harsanyi imputations," Theory and Decision, Springer, vol. 68(3), pages 301-310, March.
    7. Polemarchakis, H M, 1983. "On the Transer Paradox," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 749-760, October.
    8. Ginsburgh, Victor & Waelbroeck, Jean, 1979. "A Note on the Simultaneous Stability of Tatonnement Processes for Computing Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 367-380, June.
    9. Geanakoplos, John & Heal, Geoffrey, 1983. "A geometric explanation of the transfer paradox in a stable economy," Journal of Development Economics, Elsevier, vol. 13(1-2), pages 223-236.
    10. Haeringer, Guillaume, 2006. "A new weight scheme for the Shapley value," Mathematical Social Sciences, Elsevier, vol. 52(1), pages 88-98, July.
    11. Peleg, B, 1986. "On the Reduced Game Property and Its Converse," International Journal of Game Theory, Springer;Game Theory Society, vol. 15(3), pages 187-200.
    12. Roger B. Myerson, 1977. "Graphs and Cooperation in Games," Mathematics of Operations Research, INFORMS, vol. 2(3), pages 225-229, August.
    13. Chichilnisky, Graciela, 1980. "Basic goods, the effects of commodity transfers and the international economic order," Journal of Development Economics, Elsevier, vol. 7(4), pages 505-519, December.
    14. Pierre Dehez & Daniela Tellone, 2013. "Data Games: Sharing Public Goods with Exclusion," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(4), pages 654-673, August.
    15. Gale, David, 1974. "Exchange equilibrium and coalitions : An example," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 63-66, March.
    16. Hindriks, Jean & Myles, Gareth D., 2013. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262018691, April.
    17. René Brink & Gerard Laan & Vitaly Pruzhansky, 2011. "Harsanyi power solutions for graph-restricted games," International Journal of Game Theory, Springer;Game Theory Society, vol. 40(1), pages 87-110, February.
    18. Balasko, Yves, 1975. "Some results on uniqueness and on stability of equilibrium in general equilibrium theory," Journal of Mathematical Economics, Elsevier, vol. 2(2), pages 95-118.
    19. Srinivasan, T. N. & Bhagwati, Jagdish N., 1983. "On transfer paradoxes and immiserizing growth: Part I : Comment," Journal of Development Economics, Elsevier, vol. 13(1-2), pages 217-222.
    20. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411, October.
    21. S. C. Littlechild & G. Owen, 1973. "A Simple Expression for the Shapley Value in a Special Case," Management Science, INFORMS, vol. 20(3), pages 370-372, November.
    22. Balasko, Yves, 1992. "The set of regular equilibria," Journal of Economic Theory, Elsevier, vol. 58(1), pages 1-8, October.
    23. Jean Derks & Hans Haller & Hans Peters, 2000. "The selectope for cooperative games," International Journal of Game Theory, Springer;Game Theory Society, vol. 29(1), pages 23-38.
    24. Postlewaite, Andrew & Webb, Michael, 1984. "The possibility of recipient-harming, donor-benefiting transfers with more than two countries," Journal of International Economics, Elsevier, vol. 16(3-4), pages 357-364, May.
    25. Kannai, Yakar, 1992. "The core and balancedness," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 12, pages 355-395, Elsevier.
    26. Pierre Dehez, 2011. "Allocation Of Fixed Costs: Characterization Of The (Dual) Weighted Shapley Value," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 141-157.
    27. Dehez, Pierre & Ferey, Samuel, 2013. "How to share joint liability: A cooperative game approach," Mathematical Social Sciences, Elsevier, vol. 66(1), pages 44-50.
    28. Dragan, I. & Potters, J.A.M. & Tijs, S.H., 1989. "Superadditivity for solutions of coalitional games," Other publications TiSEM 283e2594-e3a0-418d-ae5e-2, Tilburg University, School of Economics and Management.
    29. Maniquet, Francois, 2003. "A characterization of the Shapley value in queueing problems," Journal of Economic Theory, Elsevier, vol. 109(1), pages 90-103, March.
    30. Monderer, Dov & Samet, Dov & Shapley, Lloyd S, 1992. "Weighted Values and the Core," International Journal of Game Theory, Springer;Game Theory Society, vol. 21(1), pages 27-39.
    31. Bhagwati, Jagdish N & Brecher, Richard A & Hatta, Tatsuo, 1983. "The Generalized Theory of Transfers and Welfare: Bilateral Transfers in a Multilateral World," American Economic Review, American Economic Association, vol. 73(4), pages 606-618, September.
    32. Guillermo Owen, 1968. "Communications to the Editor--A Note on the Shapley Value," Management Science, INFORMS, vol. 14(11), pages 731-731, July.
    33. Dixit, Avinash, 1983. "The multi-country transfer problem," Economics Letters, Elsevier, vol. 13(1), pages 49-53.
    34. ,, 2014. "The transfer problem: A complete characterization," Theoretical Economics, Econometric Society, vol. 9(2), May.
    35. Majumdar, Mukul & Mitra, Tapan, 1985. "A result on the transfer problem in international trade theory," Journal of International Economics, Elsevier, vol. 19(1-2), pages 161-170, August.
    36. Balasko, Yves, 1978. "The Transfer Problem and the Theory of Regular Economies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(3), pages 687-694, October.
    37. Derks, Jean, 2005. "A new proof for Weber's characterization of the random order values," Mathematical Social Sciences, Elsevier, vol. 49(3), pages 327-334, May.
    38. Ichiishi, Tatsuro, 1981. "Super-modularity: Applications to convex games and to the greedy algorithm for LP," Journal of Economic Theory, Elsevier, vol. 25(2), pages 283-286, October.
    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. Wolsey, L.A., 2015. "Uncapacitated Lot-Sizing with Stock Upper Bounds, Stock Fixed Costs, Stock Overloads and Backlogging: A Tight Formulation," LIDAM Discussion Papers CORE 2015041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Belleflamme, Paul & Vergote, Wouter, 2016. "Monopoly price discrimination and privacy: The hidden cost of hiding," Economics Letters, Elsevier, vol. 149(C), pages 141-144.
    3. Chambers, Christopher P. & Moreno-Ternero, Juan D., 2021. "Bilateral redistribution," Journal of Mathematical Economics, Elsevier, vol. 96(C).
    4. Queyranne, M. & Wolsey, L.A., 2015. "Modeling poset convex subsets," LIDAM Discussion Papers CORE 2015049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Ram Sewak Dubey & Minwook Kang, 2019. "Transfer paradox in a stable equilibrium," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 259-269, December.
    6. Decerf, B., 2015. "A new index combining the absolute and relative aspects of income poverty: Theory and application," LIDAM Discussion Papers CORE 2015050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pierre Dehez, 2017. "On Harsanyi Dividends and Asymmetric Values," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 19(03), pages 1-36, September.
    2. Sergio Turner, 2006. "How much trade does the transfer paradox require? The threshold computed," Working Papers 2006-02, Brown University, Department of Economics.
    3. Ram Sewak Dubey & Minwook Kang, 2019. "Transfer paradox in a stable equilibrium," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 259-269, December.
    4. Hamid Beladi, 1990. "Unemployment and immiserizing transfer," Journal of Economics, Springer, vol. 52(3), pages 253-265, October.
    5. Kang, Minwook & Ye, Lei Sandy, 2016. "Advantageous redistribution with three smooth CES utility functions," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 171-180.
    6. Béal, Sylvain & Ferrières, Sylvain & Rémila, Eric & Solal, Philippe, 2018. "The proportional Shapley value and applications," Games and Economic Behavior, Elsevier, vol. 108(C), pages 93-112.
    7. Vladimir Gligorov, 2016. "The Transfer and Adjustment Problems in the Balkans," wiiw Balkan Observatory Working Papers 125, The Vienna Institute for International Economic Studies, wiiw.
    8. Manfred Besner, 2020. "Parallel axiomatizations of weighted and multiweighted Shapley values, random order values, and the Harsanyi set," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 55(1), pages 193-212, June.
    9. Minwook KANG, 2015. "A Concrete Example of the Transfer Problem with Multiple Equilibria," Economic Growth Centre Working Paper Series 1504, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    10. René van den Brink & Gerard van der Laan & Valeri Vasil'ev, 0000. "The Restricted Core for Totally Positive Games with Ordered Players," Tinbergen Institute Discussion Papers 09-038/1, Tinbergen Institute.
    11. Samuel Ferey & Pierre Dehez, 2016. "Multiple Causation, Apportionment, and the Shapley Value," The Journal of Legal Studies, University of Chicago Press, vol. 45(1), pages 143-171.
    12. Zhengxing Zou & Qiang Zhang, 2018. "Harsanyi power solution for games with restricted cooperation," Journal of Combinatorial Optimization, Springer, vol. 35(1), pages 26-47, January.
    13. Bilbao, J.M. & Jiménez, N. & López, J.J., 2010. "The selectope for bicooperative games," European Journal of Operational Research, Elsevier, vol. 204(3), pages 522-532, August.
    14. Kenju Kamei, 2020. "Transfer Paradox in a General Equilibrium Economy: a First Experimental Investigation," Working Papers 2020_03, Durham University Business School.
    15. Estela Sánchez-Rodríguez & Miguel Ángel Mirás Calvo & Carmen Quinteiro Sandomingo & Iago Núñez Lugilde, 2024. "Coalition-weighted Shapley values," International Journal of Game Theory, Springer;Game Theory Society, vol. 53(2), pages 547-577, June.
    16. Sylvain Béal & Marc Deschamps & Catherine Refait-Alexandre & Guillaume Sekli, 2022. "Early contributors, cooperation and fair rewards in crowdfunding," Working Papers hal-04222321, HAL.
    17. Sylvain Béal & Sylvain Ferrières & Philippe Solal, 2022. "The priority value for cooperative games with a priority structure," International Journal of Game Theory, Springer;Game Theory Society, vol. 51(2), pages 431-450, June.
    18. Kamijo, Yoshio, 2009. "A linear proportional effort allocation rule," Mathematical Social Sciences, Elsevier, vol. 58(3), pages 341-353, November.
    19. Dehez, Pierre & Ferey, Samuel, 2013. "How to share joint liability: A cooperative game approach," Mathematical Social Sciences, Elsevier, vol. 66(1), pages 44-50.
    20. Lynn Mainwaring, 1998. "Transfers in a North‐South Growth Model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(5), pages 592-603, November.

    More about this item

    Keywords

    welfare equilibrium; exchange economy; transfer paradox;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D60 - Microeconomics - - Welfare Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:eca:wpaper:2013/189873. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Benoit Pauwels (email available below). General contact details of provider: https://edirc.repec.org/data/arulbbe.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.