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On fairness, efficiency and social structure

Jean-Paul Chavas ()

Metroeconomica, 2020, vol. 71, issue 2, 369-391

Abstract: This paper presents an evaluation of economic efficiency and fairness, with a focus on the role of social relations in fairness evaluation. Defining fairness as the absence of envy, we introduce “switching costs” among individuals in the assessment of envy. When such costs depend on social relations, our analysis stresses the importance of social structure. When fairness is inconsistent with efficiency, we propose a measure of the cost of fairness. In a market economy, we show that fairness does not affect the validity of profit maximization. But it may require non‐linear pricing. Implications of the analysis for policy are discussed.

Date: 2020
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