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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 of endowments between two agents results in a welfare decrease for the recipient and a welfare increase for the donor. It is known that in a two-agent regular exchange economy with an arbitrary number of goods, the transfer paradox occurs only if the price equilibrium is unstable. In this paper, we show that in the space of welfare weights, the set of stable equilibria and the set of no-transfer paradox equilibria coincide. As a corollary we also obtain that for two agents and an arbitrary number of goods, the index of an equilibrium in price space coincides with its index in welfare space.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/251993.

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Date of creation: 2016
Publication status: Published in: Journal of mathematical economics (2016) v.62,p.1-4
Handle: RePEc:ulb:ulbeco:2013/251993
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  35. repec:spr:compst:v:64:y:2006:i:1:p:155-163 is not listed on IDEAS
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