Quantifying Inefficiency

Yannai A. Gonczarowski and Ella Segev

Papers from arXiv.org

Abstract: We axiomatically define a cardinal social inefficiency function, which, given a set of alternatives and individuals' vNM preferences over the alternatives, assigns a unique number -- the social inefficiency -- to each alternative. These numbers -- and not only their order -- are uniquely defined by our axioms despite no exogenously given interpersonal comparison, outside option, or disagreement point. We interpret these numbers as per-capita losses in endogenously normalized utility. We apply our social inefficiency function to a setting in which interpersonal comparison is notoriously hard to justify -- object allocation without money -- leveraging techniques from computer science to prove an approximate-efficiency result for the Random Serial Dictatorship mechanism.

Date: 2024-12, Revised 2025-11
New Economics Papers: this item is included in nep-des and nep-upt
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