The transfer paradox in welfare space

Thomas Demuynck, Bram De Rock and Victor Ginsburgh

No 2015039, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: 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.

Keywords: welfare equilibrium; exchange economy; transfer paradox (search for similar items in EconPapers)
JEL-codes: D51 D60 (search for similar items in EconPapers)
Date: 2015-09-24
New Economics Papers: this item is included in nep-mic and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The transfer paradox in welfare space (2016)
Working Paper: The transfer paradox in welfare space (2016)
Working Paper: The transfer paradox in welfare space (2016)
Working Paper: The Transfer Paradox in Welfare Space (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2015039

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