Pareto efficiency in the jungle

Harold Houba, Roland Iwan Luttens () and Hans-Peter Weikard
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Roland Iwan Luttens: Vrije Universiteit Amsterdam

Review of Economic Design, 2017, vol. 21, issue 3, No 1, 153-161

Abstract: Abstract We revisit the jungle economy of Piccione and Rubinstein (Econ J 117(July):883–896, 2007) in which the allocation of resources is driven by coercion. In this economy the unique equilibrium satisfies lexicographic maximization. We show that relaxing the assumptions on consumption sets and preferences slightly, allocations other than lexicographic maximizers can be jungle equilibria. We attribute this result to single unilateral taking where a stronger agent takes goods from only one weaker agent. Once multiple unilateral takings are introduced, we show that jungle equilibria coincide with lexicographic maximization under weak assumptions. However, we also present examples of equilibria that are Pareto inefficient, where voluntary gift giving by stronger agents is needed to achieve Pareto efficiency and even voluntary trade has a role in the jungle.

Keywords: Power; Coercion; Jungle economy; Pareto efficiency; Gift giving; Trade (search for similar items in EconPapers)
JEL-codes: D51 D61 P52 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Working Paper: Pareto Efficiency in the Jungle (2014)
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DOI: 10.1007/s10058-017-0199-3

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