Sufficient conditions for a "simple" decentralization with consumption externalities

Elena del Mercato and Van Quy Nguyen ()
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Van Quy Nguyen: Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.cnrs.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: We consider a pure exchange economy with consumption externalities in preferences. Using the notion of competitive equilibrium à la Nash, we point out that a simple condition for restoring the Second Welfare Theorem is that the set of Pareto optima is included in the set of internal Pareto optima. We provide the Social Redistribution assumption to ensure such inclusion. This assumption is weaker than other relevant assumptions that have been studied in the literature. We also introduce new conditions in a differential setting, called (Strong) Directional Social Redistribution. Our assumptions entail interesting results on the decentralized implementation of Pareto optima, that relate the competitive supporting price and the social shadow price. Finally, we show that, for Bergson-Samuelson utility functions, Strong Directional Social Redistribution is ensured by a specific property of the Jacobian matrix, which has a natural interpretation in terms of externalities

Keywords: Consumption externalities; competitive equilibrium à la Nash; decentralization; social redistribution (search for similar items in EconPapers)
JEL-codes: D11 D50 D62 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2021-07, Revised 2022-06
New Economics Papers: this item is included in nep-dem and nep-upt
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https://shs.hal.science/halshs-03354304 (application/pdf)

Related works:
Journal Article: Sufficient conditions for a “simple” decentralization with consumption externalities (2023)
Working Paper: Sufficient conditions for a “simple” decentralization with consumption externalities (2023)
Working Paper: Sufficient conditions for a “simple” decentralization with consumption externalities (2023)
Working Paper: Sufficient conditions for a “simple” decentralization with consumption externalities (2023)
Working Paper: Sufficient conditions for a "simple" decentralization with consumption externalities (2022)
Working Paper: Sufficient conditions for a "simple" decentralization with consumption externalities (2022)
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