The Transfer Paradox in Welfare Space

Thomas Demuynck, Bram De Rock and Victor Ginsburgh

Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: The transfer paradox describes a situation in which a transfer ofendowments between two agents results in a welfare decrease for therecipient and a welfare increase for the donor. It is known that ina two-agent regular exchange economy with an arbitrary number ofgoods, the transfer paradox occurs only if the price equilibrium isunstable. In this paper, we show that in the space of welfare weights,the set of stable equilibria and the set of no-transfer paradox equilibriacoincide. As a corollary we also obtain that for two agents and anarbitrary number of goods, the index of an equilibrium in price spacecoincides with its index in welfare space.

Keywords: welfare equilibrium; exchange economy; transfer paradox (search for similar items in EconPapers)
JEL-codes: D51 D60 (search for similar items in EconPapers)
Pages: 12 p.
Date: 2015-01
New Economics Papers: this item is included in nep-mic and nep-pbe
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The transfer paradox in welfare space (2016)
Working Paper: The transfer paradox in welfare space (2016)
Working Paper: The transfer paradox in welfare space (2016)
Working Paper: The transfer paradox in welfare space (2015)
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