Share the Gain, Share the Pain? Almost Transferable Utility, Changes in Production Possibilities, and Bargaining Solutions

CIRPEE Working Paper 09-38

24 Pages Posted: 1 Sep 2009

See all articles by Elisabeth Gugl

Elisabeth Gugl

University of Victoria - Economics

Justin Leroux

HEC Montreal - Institute of Applied Economics; CIRANO

Date Written: August 31, 2009

Abstract

Consider an n-person economy in which efficiency is independent of distribution but the cardinal properties of the agents’ utility functions precludes transferable utility (a property we call “Almost TU”). 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 household decision-making in the contex of the Rotten Kid Theorem and in evaluating a change in family taxation.

Keywords: Axiomatic Bargaining, Solidarity, Transferable utility, Family T-taxation, Rotten Kid Theorem

JEL Classification: C71, D63, D13

Suggested Citation

Gugl, Elisabeth and Leroux, Justin, Share the Gain, Share the Pain? Almost Transferable Utility, Changes in Production Possibilities, and Bargaining Solutions (August 31, 2009). CIRPEE Working Paper 09-38, Available at SSRN: https://ssrn.com/abstract=1464719 or http://dx.doi.org/10.2139/ssrn.1464719

Elisabeth Gugl

University of Victoria - Economics ( email )

Victoria V8W Y2Y, BC
Canada

Justin Leroux (Contact Author)

HEC Montreal - Institute of Applied Economics ( email )

3000, ch. de la Côte-Ste-Catherine
Montréal, Quebec H3T 2A7
Canada

CIRANO ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
17
Abstract Views
638
PlumX Metrics