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Pareto Efficiency in the Jungle

Author

Listed:
  • Harold Houba

    (VU University Amsterdam, the Netherlands)

  • Roland Iwan Luttens

    (Amsterdam University College, the Netherlands)

  • Hans-Peter Weikard

    (Wageningen University, the Netherlands)

Abstract

We include initial holdings in the jungle economy of Piccione and Rubinstein (Economic Journal, 2007) in which the unique equilibrium satisfies lexicographic welfare maximization. When we relax assumptions on consumption sets and preferences slightly, equilibria other than lexicographic welfare maximizers can be jungle equilibria. This result is due to myopia. We introduce the concept of farsightedness and show that farsighted jungle equilibria coincide with lexicographic welfare maximization. However, we also find farsighted equilibria that are Pareto inefficient since stronger agents may withhold goods from weaker agents. Here, gift giving by stronger agents is needed to achieve Pareto efficiency. We argue that even trade has a role in the jungle. Our results add to understanding coercion and the subtle role of gift giving and trade in an economy purely based on po wer relations.

Suggested Citation

  • Harold Houba & Roland Iwan Luttens & Hans-Peter Weikard, 2014. "Pareto Efficiency in the Jungle," Tinbergen Institute Discussion Papers 14-144/II, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20140144
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    File URL: https://papers.tinbergen.nl/14144.pdf
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    References listed on IDEAS

    as
    1. Michele Piccione & Ariel Rubinstein, 2007. "Equilibrium in the Jungle," Economic Journal, Royal Economic Society, vol. 117(522), pages 883-896, July.
    2. Emanuela Randon & Peter Simmons, 2017. "A top dog tale with preference complementarities," Journal of Economics, Springer, vol. 120(1), pages 47-63, January.
    3. E. Randon & P. Simmons, 2012. "A Top Dog Tale with Preference Rigidities," Working Papers wp839, Dipartimento Scienze Economiche, Universita' di Bologna.
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    Cited by:

    1. Bertrand Crettez, 2020. "Pareto-minimality in the jungle," Public Choice, Springer, vol. 182(3), pages 495-508, March.
    2. Soldatos, Gerasimos T., 2015. "Peacemaking and Peacebuilding through Opponent Non-Economic and Economic Homogenization," MPRA Paper 67482, University Library of Munich, Germany.
    3. Joshua S. Gans, 2018. "Self-Regulating Artificial General Intelligence," NBER Working Papers 24352, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    power; coercion; jungle economy; farsightedness; withholding;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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