Share the gain, share the pain? Almost transferable utility, changes in production possibilities, and bargaining solutions

We consider an n-person economy in which efficiency is independent of distribution but the cardinal properties of the agents’ utility functions may preclude transferable utility (a property we call “Almost TU”). Holding the disagreement point fixed, we show that Almost TU is a necessary and sufficie...

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Bibliographic Details
Published in:Mathematical social sciences 2011-11, Vol.62 (3), p.133-143
Main Authors: Gugl, Elisabeth, Leroux, Justin
Format: Article
Language:English
Subjects:
Agency
Bargaining
Economic theory
Negotiation
Policy Analysis
Production
Utility theory
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Summary:We consider an n-person economy in which efficiency is independent of distribution but the cardinal properties of the agents’ utility functions may preclude transferable utility (a property we call “Almost TU”). Holding the disagreement point fixed, we show that Almost TU is a necessary and sufficient condition for all agents to either benefit jointly or suffer jointly with any change in production possibilities under well-behaved generalized utilitarian bargaining solutions (of which the Nash bargaining and the utilitarian solutions are special cases). We apply the result to policy analysis and to incentive compatibility. ► Generalized Utilitarian Bargaining solutions (GUBS) violate solidarity. ► Cardinal properties of individuals’ utility functions matter for GUBS. ► We introduce ATU, a utility domain that shares with TU the same ordinal properties. ► ATU allows for a much broader range of cardinal properties than TU. ► We prove that GUBS satisfy solidarity if and only if utility profiles satisfy ATU.
ISSN:0165-4896
1879-3118
DOI:10.1016/j.mathsocsci.2011.08.002