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A Free and Fair Economy: A Game of Justice and Inclusion

Ghislain-Herman Demeze-Jouatsa, Roland Pongou and Jean-Baptiste Tondji
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Ghislain-Herman Demeze-Jouatsa: Center for Mathematical Economics, Bielefeld University
Roland Pongou: Center for Mathematical Economics, Bielefeld University
Jean-Baptiste Tondji: Center for Mathematical Economics, Bielefeld University

No 653, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: Frequent violations of fair principles in real-life settings raise the fundamental question of whether such principles can guarantee the existence of a self-enforcing equilibrium in a free economy. We show that elementary principles of distributive justice guarantee that a pure-strategy Nash equilibrium exists in a finite economy where agents freely (and non- cooperatively) choose their inputs and derive utility from their pay. Chief among these principles is that: 1) your pay should not depend on your name; and 2) a more productive agent should not earn less. When these principles are violated, an equilibrium may not exist. Moreover, we uncover an intuitive condition|technological monotonicity|that guarantees equilibrium uniqueness and efficiency. We generalize our findings to economies with social justice and inclusion, implemented in the form of progressive taxation and redistribution, and guaranteeing a basic income to unproductive agents. Our analysis uncovers a new class of strategic form games by incorporating normative principles into non-cooperative game theory. Our results rely on no particular assumptions, and our setup is entirely non- parametric. Illustrations of the theory include applications to exchange economies, surplus distribution in a firm, contagion and self-enforcing lockdown in a networked economy, and bias in the academic peer-review system.

Keywords: Market justice; Social justice; Inclusion; Ethics; Discrimination; Self-enforcing contracts; Fairness in non-cooperative games; Pure strategy Nash equilibrium; Efficiency (search for similar items in EconPapers)
Pages: 49
Date: 2021-09-16
New Economics Papers: this item is included in nep-cwa, nep-gth, nep-hpe, nep-isf and nep-upt
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