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The Transfer Paradox in Welfare Space

Listed author(s):
  • Thomas Demuynck
  • Bram De Rock
  • Victor Ginsburgh

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.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/189873/1/2015-01-DEMUYNCK_DEROCK_GINSBURGH-thetransfer.pdf
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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number ECARES 2015-01.

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Length: 12 p.
Date of creation: Jan 2015
Publication status: Published by:
Handle: RePEc:eca:wpaper:2013/189873
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  36. repec:spr:compst:v:64:y:2006:i:1:p:155-163 is not listed on IDEAS
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