Pareto efficiency in the jungle

Pareto efficiency in the jungle We revisit the jungle economy of Piccione and Rubinstein (Econ J 117(July):883–896, 2007) in which the allocation of resources is driven by coercion. In this economy the unique equilibrium satisfies lexicographic maximization. We show that relaxing the assumptions on consumption sets and preferences slightly, allocations other than lexicographic maximizers can be jungle equilibria. We attribute this result to single unilateral taking where a stronger agent takes goods from only one weaker agent. Once multiple unilateral takings are introduced, we show that jungle equilibria coincide with lexicographic maximization under weak assumptions. However, we also present examples of equilibria that are Pareto inefficient, where voluntary gift giving by stronger agents is needed to achieve Pareto efficiency and even voluntary trade has a role in the jungle. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Economic Design Springer Journals

Pareto efficiency in the jungle

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Publisher
Springer Journals
Copyright
Copyright © 2017 by The Author(s)
Subject
Economics; Economics, general; Economic Theory/Quantitative Economics/Mathematical Methods; Game Theory, Economics, Social and Behav. Sciences; Microeconomics; Behavioral/Experimental Economics
ISSN
1434-4742
eISSN
1434-4750
D.O.I.
10.1007/s10058-017-0199-3
Publisher site
See Article on Publisher Site

Abstract

We revisit the jungle economy of Piccione and Rubinstein (Econ J 117(July):883–896, 2007) in which the allocation of resources is driven by coercion. In this economy the unique equilibrium satisfies lexicographic maximization. We show that relaxing the assumptions on consumption sets and preferences slightly, allocations other than lexicographic maximizers can be jungle equilibria. We attribute this result to single unilateral taking where a stronger agent takes goods from only one weaker agent. Once multiple unilateral takings are introduced, we show that jungle equilibria coincide with lexicographic maximization under weak assumptions. However, we also present examples of equilibria that are Pareto inefficient, where voluntary gift giving by stronger agents is needed to achieve Pareto efficiency and even voluntary trade has a role in the jungle.

Journal

Review of Economic DesignSpringer Journals

Published: Apr 8, 2017

References

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