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Beyond the Horizon: Attainability of Pareto Optimality when the Indefinite Future Matters

Author

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  • Simon P. Eveson
  • Jacco J.J. Thijssen

Abstract

In this paper we study the attainability of Pareto optimal allocations in infinitedimensional exchange economies where agents have utility functions that value consumption at infinity. Such a model can be used to model economic settings where the indefinite future matters. The commodity space that we use is the space of all convergent sequences. We derive a necessary and sufficient condition for the attainability of the Pareto optimal allocations, which states that, for each pair of consumers, the ratio of the weights they place on utility in finite time periods should converge to the ratio of their utility weights at infinity. This, in turn, implies that efficiency can only be attained if consumers’ valuations of time are very similar. We extend the model to include consumers with Rawlsian preferences and find that this does not change the attainability of Pareto optimal allocations.

Suggested Citation

  • Simon P. Eveson & Jacco J.J. Thijssen, 2012. "Beyond the Horizon: Attainability of Pareto Optimality when the Indefinite Future Matters," Discussion Papers 12/29, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:12/29
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    File URL: https://www.york.ac.uk/media/economics/documents/discussionpapers/2012/1229.pdf
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    References listed on IDEAS

    as
    1. Brown, Donald J & Lewis, Lucinda M, 1981. "Myopic Economic Agents," Econometrica, Econometric Society, vol. 49(2), pages 359-368, March.
    2. Graciela Chichilnisky, 2012. "Economic theory and the global environment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(2), pages 217-225, February.
    3. Graciela Chichilnisky, 2012. "Sustainable markets with short sales," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(2), pages 293-307, February.
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    More about this item

    Keywords

    Infinite horizon exchange economy; Pareto optimality; non-discounting preferences;

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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