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Pareto Efficiency in the Jungle

Harold Houba, Roland Iwan Luttens and Hans-Peter Weikard
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Roland Iwan Luttens: Amsterdam University College, the Netherlands

No 14-144/II, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We include initial holdings in the jungle economy of Piccione and Rubinstein (Economic Journal, 2007) in which the unique equilibrium satisfies lexicographic welfare maximization. When we relax assumptions on consumption sets and preferences slightly, equilibria other than lexicographic welfare maximizers can be jungle equilibria. This result is due to myopia. We introduce the concept of farsightedness and show that farsighted jungle equilibria coincide with lexicographic welfare maximization. However, we also find farsighted equilibria that are Pareto inefficient since stronger agents may withhold goods from weaker agents. Here, gift giving by stronger agents is needed to achieve Pareto efficiency. We argue that even trade has a role in the jungle. Our results add to understanding coercion and the subtle role of gift giving and trade in an economy purely based on po wer relations.

Keywords: power; coercion; jungle economy; farsightedness; withholding (search for similar items in EconPapers)
JEL-codes: D51 D61 P52 (search for similar items in EconPapers)
Date: 2014-10-30
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (1)

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Journal Article: Pareto efficiency in the jungle (2017) Downloads
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