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Judging Social Welfare Policy with the Solving of the Bargaining Problem


  • Joseph E. Mullat

    (idependent researcher, 1979-1980 assoc. Prof. Economic Division Tallinn Technical University; Estonia)


Current analysis addresses an apparently critical issue of wealth circulation in the society. In the form of three persons game, we put the welfare-related burden on taxpayers. The Negotiator No.1 stands up for citizens’ legal and moral right to social services. The Negotiator No.2 proceeds from the needs of citizens for the provision of public goods. Quite the opposite, the Player, called No.3, gives the private consumption a preference over social services and public goods, i.e., the citizens-taxpayers try to reduce their tax obligations being accumulated into the general account of negotiators No.1 and No.2. In fact, the voters-citizens fulfil their expectations about taxes by a threat to acknowledge or to reject the bargaining agreement, e.g. a welfare committee must approve a motion against big taxes by unanimous vote. The government assesses and controls the wealth circulation by poverty line parameter. We provide an evidence for claim that 50% median income is an ideal solution.

Suggested Citation

  • Joseph E. Mullat, 2003. "Judging Social Welfare Policy with the Solving of the Bargaining Problem," Game Theory and Information 0304004, University Library of Munich, Germany, revised 18 Apr 2005.
  • Handle: RePEc:wpa:wuwpga:0304004
    Note: Type of Document - Acrobat PDF; prepared on Adobe ver. 4.0; to print on transparent/device-independent; pages-30; tables-1, figures-3. Earlier version of this paper was presented at the Third International Conference on Public Economics, PET02, Paris, July 4th – 6th 2002,,, Research Announcements, Economics Bulletin,Vol. 28 no. 22, 2001, current version has been presented at the Conference of Economic Design, SED04, Mallorca, June 29th – July 2nd 2004,

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    References listed on IDEAS

    1. Lars P. Feld & Bruno S. Frey, 2002. "Trust breeds trust: How taxpayers are treated," Economics of Governance, Springer, vol. 3(2), pages 87-99, July.
    2. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-764, July.
    3. Malcomson, James M., 1986. "Some analytics of the laffer curve," Journal of Public Economics, Elsevier, vol. 29(3), pages 263-279, April.
    4. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    5. Frances Stewart, 2003. "Income distribution and development," Chapters, in: John Toye (ed.), Trade and Development, chapter 10, Edward Elgar Publishing.
    6. Peter Saunders, 1993. "Economic Adjustment and Distributional Change: Income Inequality and Poverty in Australia in the Eighties," Discussion Papers 0047, University of New South Wales, Social Policy Research Centre.
    7. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    8. Rapoport, Anatol, 1994. "Problems of normative and descriptive decision theories," Mathematical Social Sciences, Elsevier, vol. 27(1), pages 31-47, February.
    9. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-231, March.
    10. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
    11. Cremer, Helmuth & Gahvari, Firouz, 1997. "In-kind transfers, self-selection and optimal tax policy," European Economic Review, Elsevier, vol. 41(1), pages 97-114, January.
    12. Berliant, M. & Gouveia, M., 1990. "Incentive Compatible Income Taxation, Individual Revenue Requirements And Welfare," RCER Working Papers 234, University of Rochester - Center for Economic Research (RCER).
    13. Reiner Eichenberger & Felix Oberholzer-Gee, 1998. "Rational moralists: The role of fairness in democratic economic politics," Public Choice, Springer, vol. 94(1), pages 191-210, January.
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    More about this item


    : bargaining; decision; public goods; taxation; voting;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation


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