Monotonicity of social welfare optima

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Jens Leth Hougaard, Lars Peter Raahave Østerdal

This paper considers the problem of maximizing social welfare subject to participation constraints. It is shown that for an income allocation method that maximizes a social welfare function there is a monotonic relationship between the incomes allocated to individual agents in a given coalition (with at least three members) and its participation constraint if and only if the aggregate income to that coalition is always maximized. An impossibility result demonstrates that there is no welfare maximizing allocation method in which agents' individual incomes monotonically increase in society's income. Thus, for any such allocation method, there are situations where some agents have incentives to prevent society in becoming richer.
Original languageEnglish
JournalGames and Economic Behavior
Volume70
Issue number2
Pages (from-to)392-402
Number of pages11
ISSN0899-8256
DOIs
Publication statusPublished - 2010

ID: 21593214