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Inequity-averse preferences in general equilibrium

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  • Rodrigo A. Velez

    (Texas A&M University, Department of Economics)

Abstract

We study the stability with respect to the introduction of opportunity-based inequity aversion a la Dufwenberg et. al (2011) of three welfare properties satisfied by competitive equilibria in self-regarding economies: (i) Pareto efficiency may not be a stable property; (ii) undomination with respect to income redistribution is a stable property whenever the marginal indirect utility of income has no extreme variations; and (iii) generically (endowment-wise) market-constrained efficiency is a stable property.

Suggested Citation

  • Rodrigo A. Velez, 2016. "Inequity-averse preferences in general equilibrium," Working Papers 20160111-001, Texas A&M University, Department of Economics.
    • Handle: RePEc:txm:wpaper:20160111-001
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    References listed on IDEAS

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    1. John Geanakoplos & H M Polemchakis, 2008. "Pareto Improving Taxes," Levine's Working Paper Archive 122247000000002219, David K. Levine.
    2. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    3. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-392, May.
    4. Ernst Fehr & Klaus M. Schmidt, "undated". "Theories of Fairness and Reciprocity - Evidence and Economic Applications," IEW - Working Papers 075, Institute for Empirical Research in Economics - University of Zurich.
    5. Geanakoplos, John & Polemarchakis, H.M., 2008. "Pareto improving taxes," Journal of Mathematical Economics, Elsevier, vol. 44(7-8), pages 682-696, July.
    6. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    7. Velez, Rodrigo A., 2016. "Fairness and externalities," Theoretical Economics, Econometric Society, vol. 11(1), January.
    8. Martin Dufwenberg & Paul Heidhues & Georg Kirchsteiger & Frank Riedel & Joel Sobel, 2011. "Other-Regarding Preferences in General Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(2), pages 613-639.
    9. Fehr, Ernst & Schmidt, Klaus M., 2001. "Theories of Fairness and Reciprocity," Discussion Papers in Economics 14, University of Munich, Department of Economics.
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    More about this item

    Keywords

    inequity aversion; general equilibrium;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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