A Top Dog Tale with Preference Rigidities

Quaderni DSE Working Paper No. 839

32 Pages Posted: 4 Jul 2012

See all articles by Emanuela Randon

Emanuela Randon

University of Bologna

Peter J. Simmons

University of York - Department of Economics and Related Studies

Date Written: July 4, 2012

Abstract

With preference rigidities we find Pareto optima of an exchange economy, some of which involve unconsumed endowments. We show that such Pareto Optima can only be attained as market equilibria if there is a top dog in the initial endowment distribution who is richer than the other individuals. The most inegalitarian efficient allocation favoring the top dog is globally stable and is in the core. For endowment distributions with a top dog, the core contains efficient allocations more equal than the market equilibrium. A voting mechanism or government policy can also offset the top dog’s power.

Keywords: exchange economy, complements, top dog allocation

JEL Classification: D50, D61

Suggested Citation

Randon, Emanuela and Simmons, Peter J., A Top Dog Tale with Preference Rigidities (July 4, 2012). Quaderni DSE Working Paper No. 839, Available at SSRN: https://ssrn.com/abstract=2100360 or http://dx.doi.org/10.2139/ssrn.2100360

Emanuela Randon (Contact Author)

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

Peter J. Simmons

University of York - Department of Economics and Related Studies ( email )

Heslington
York, YO1 5DD
United Kingdom

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