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Infinite-horizon choice functions

Author

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  • Asheim, Geir B.
  • Bossert, Walter
  • Sprumont, Yves
  • Suzumura, Kotaro

Abstract

We analyze infinite-horizon choice functions within the setting of a simple technology. Efficiency and time consistency are characterized by stationary consumption and inheritance functions, as well as a transversality condition. In addition, we consider the equity axioms Suppes-Sen, Pigou-Dalton, and resource monotonicity. We show that Suppes-Sen and Pigou-Dalton imply that the consumption and inheritance functions are monotone with respect to time - thus justifying sustainability - while resource monotonicity implies that the consumption and inheritance functions are monotone with respect to the resource. Examples illustrate the characterization results.

Suggested Citation

  • Asheim, Geir B. & Bossert, Walter & Sprumont, Yves & Suzumura, Kotaro, 2008. "Infinite-horizon choice functions," PIE/CIS Discussion Paper 379, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:piecis:379
    Note: This version: January 23, 2008, An earlier version of the paper was presented at Seoul National University, Victoria University of Wellington, the University of Auckland, the 2005 polarization and conflict conference in Milan, the 2006 workshop on intergenerational resource allocation in Montréal and the University of New South Wales.
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    References listed on IDEAS

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    1. Kaushik Basu & Tapan Mitra, 2003. "Aggregating Infinite Utility Streams with InterGenerational Equity: The Impossibility of Being Paretian," Econometrica, Econometric Society, vol. 71(5), pages 1557-1563, September.
    2. Asheim, Geir B. & Buchholz, Wolfgang & Tungodden, Bertil, 2001. "Justifying Sustainability," Journal of Environmental Economics and Management, Elsevier, vol. 41(3), pages 252-268, May.
    3. Asheim, Geir B., 1991. "Unjust intergenerational allocations," Journal of Economic Theory, Elsevier, vol. 54(2), pages 350-371, August.
    4. D. Cass & M. E. Yaari, 1971. "Present Values Playing the Role of Efficiency Prices in the One-Good Growth Model," Review of Economic Studies, Oxford University Press, vol. 38(3), pages 331-339.
    5. Basu, Kaushik & Mitra, Tapan, 2007. "Utilitarianism for infinite utility streams: A new welfare criterion and its axiomatic characterization," Journal of Economic Theory, Elsevier, vol. 133(1), pages 350-373, March.
    6. Bossert, Walter & Suzumura, Kotaro, 2008. "A characterization of consistent collective choice rules," Journal of Economic Theory, Elsevier, vol. 138(1), pages 311-320, January.
    7. Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation for Research in Economics, Yale University.
    8. Walter Bossert & Yves Sprumont & Kotaro Suzumura, 2005. "Consistent Rationalizability," Economica, London School of Economics and Political Science, vol. 72(286), pages 185-200, May.
    9. Chiaki Hara & Tomoichi Shinotsuka & Kotaro Suzumura & Yongsheng Xu, 2008. "Continuity and egalitarianism in the evaluation of infinite utility streams," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 31(2), pages 179-191, August.
    10. Geir Asheim & Bertil Tungodden, 2004. "Resolving distributional conflicts between generations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(1), pages 221-230, July.
    11. Asheim, Geir B. & Tungodden, Bertil, 2005. "A new equity condition for infinite utility streams and the possibility of being Paretian," Memorandum 08/2005, Oslo University, Department of Economics.
    12. William Thomson, 2007. "Fair Allocation Rules," RCER Working Papers 539, University of Rochester - Center for Economic Research (RCER).
    13. Bossert, Walter & Sprumont, Yves & Suzumura, Kotaro, 2007. "Ordering infinite utility streams," Journal of Economic Theory, Elsevier, vol. 135(1), pages 579-589, July.
    14. Mitra, Tapan, 1979. "On the Value Maximizing Property of Infinite Horizon Efficient Programs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(3), pages 635-642, October.
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    Cited by:

    1. Castellano, Rosella & Cerqueti, Roy & Spinesi, Luca, 2016. "Sustainable management of fossil fuels: A dynamic stochastic optimization approach with jump-diffusion," European Journal of Operational Research, Elsevier, vol. 255(1), pages 288-297.
    2. José Carlos R. Alcantud & María D. García-Sanz, 2013. "Evaluations of Infinite Utility Streams: Pareto Efficient and Egalitarian Axiomatics," Metroeconomica, Wiley Blackwell, vol. 64(3), pages 432-447, July.
    3. Tanguy Isaac & Paolo Piacquadio, 2015. "Equity and efficiency in an overlapping generation model," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(3), pages 549-565, March.
    4. José Alcantud, 2009. "Conditional ordering extensions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(3), pages 495-503, June.
    5. Piacquadio, Paolo G., 2014. "Intergenerational egalitarianism," Journal of Economic Theory, Elsevier, vol. 153(C), pages 117-127.
    6. Ram Dubey & Tapan Mitra, 2013. "On the nature of Suppes–Sen maximal paths in an aggregative growth model," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(1), pages 173-205, January.

    More about this item

    Keywords

    Intergenerational resource allocation; infinite-horizon choice;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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