Egalitarian-Equivalence and the Pareto Principle for Social Preferences

Koichi Tadenuma, 宏一 蓼沼 and コウイチ タデヌマ

No 128, Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: When we construct social preferences, the Pareto principle is often in conflict with the equity criteria: there exist two allocations x and y such that x Pareto dominates y, but y is an equitable allocation whereas x is not. The efficiency-first principle requires to rank an allocation x higher than y if (i) x Pareto dominates y or (ii) x and y are Pareto-noncomparable and x is equitable whereas y is not. The equity-first principle reverses the order of application of the two criteria. Adopting egalitarian-equivalence as the notion of equity, we examine rationality of the social preference functions based on the efficiency-first or the equity-first principle. The degrees of rationality vary widely depending on which principle is adopted, and depending on the range of egalitarian-reference bundles. We show several impossibility and possibility results as well as a characterization of the social preference function introduced by Pazner and Schmeidler (1978). We also identify the sets of maximal allocations of the social preference relations in an Edgeworth box. The results are contrasted with those in the case where no-envy is the notion of equity.

JEL-codes: D61 D63 D71 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2002-12
Note: This version: September 2002; First version: July 2002
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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/14533/pie_dp128.pdf

Related works:
Journal Article: Egalitarian-equivalence and the Pareto principle for social preferences (2005)
Working Paper: Egalitarian-Equivalence and the Pareto Principle for Social Preferences (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:piedp1:128

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