Transfer paradox in a general equilibrium economy: An experimental investigation

Kenju Kamei

Economics Letters, 2022, vol. 211, issue C

Abstract: The transfer paradox, whereby a transfer of resources that influences the equilibrium price benefits the donor while harming the recipient, is a classic paradox in general equilibrium theory. This paper pursues an experimental investigation of the transfer paradox using a three-agent pure exchange economy that is predicted to have such a paradox. The results indicate that an endowment adjustment among agents influences the market price, and consequently the donors benefit from the transfer, consistent with the competitive equilibrium theory. When given an option to make a transfer, half of donor agents voluntarily decide to adjust the endowment distribution.

Keywords: Experiments; Transfer paradox; General equilibrium; Equilibrium effects (search for similar items in EconPapers)
JEL-codes: C92 D51 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Transfer Paradox in a General Equilibrium Economy: An Experimental Investigation (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:211:y:2022:i:c:s0165176521004821

DOI: 10.1016/j.econlet.2021.110253

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