Social Preference Under Twofold Uncertainty

29 Pages Posted: 19 Jun 2016

See all articles by Philippe Mongin

Philippe Mongin

GREGHEC; CNRS & HEC Paris - Economics & Decision Sciences

Marcus Pivato

THEMA, Université de Cergy-Pontoise

Date Written: June 8, 2016

Abstract

We investigate the conflict between the ex ante and ex post criteria of social welfare in a novel axiomatic framework of individual and social decisions, which distinguishes between a subjective and an objective source of uncertainty. This framework permits us to endow the individuals and society not only with ex ante and ex post preferences, as is classically done, but also with interim preferences of two kinds, and correspondingly, to introduce interim forms of the Pareto principle. After characterizing the ex ante and ex post criteria, we present a first solution to their conflict that amounts to extending the former as much possible in the direction of the latter. Then, we present a second solution, which goes in the opposite direction, and is our preferred one. This solution combines the ex post criterion with an objective interim Pareto principle, which avoids the pitfalls of the ex ante Pareto principle, and especially the problem of "spurious unanimity" discussed in the literature. Both solutions translate the assumed Pareto conditions into weighted additive utility representations, and both attribute common individual probability values only to the objective source of uncertainty.

Keywords: Ex ante social welfare, Ex post social welfare, Objective versus subjective uncertainty, Pareto principle, Separability, Harsanyi social aggregation theorem, Spurious unanimity

JEL Classification: D70, D81

Suggested Citation

Mongin, Philippe and Pivato, Marcus, Social Preference Under Twofold Uncertainty (June 8, 2016). HEC Paris Research Paper No. ECO/SCD-2016-1154. Available at SSRN: https://ssrn.com/abstract=2796560 or http://dx.doi.org/10.2139/ssrn.2796560

Philippe Mongin (Contact Author)

GREGHEC ( email )

1 rue de la Libération
Jouy-en-Josas, 78350
France

CNRS & HEC Paris - Economics & Decision Sciences ( email )

Paris
France

Marcus Pivato

THEMA, Université de Cergy-Pontoise ( email )

33 Boulevard du Port
Cergy-Pontoise Cedex, Cedex 95011
France

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