Acceptable and Walrasian allocations (Q1590382): Difference between revisions

The paper provides an axiomatic approach to mechanisms which determine the individuals' `contributions' to the total welfare of society, for every finite pure exchange economy and for every allocation of the total resources. More specifically, let \(E\) be the set of all finite pure exchange economies such that consumer's preference can be represented by a strictly increasing concave and continuously differentiable utility function. Given \(e\in E\) and a Pareto optimal allocation, the social welfare function \(F(w)\) is defined to be the maximum level of welfare that the society as a whole can achieve if its total resources is \(w\). To measure the individuals' `contributions' to the total welfare in an economy \(e\in E\), a contribution mechanism is defined to be a function \(C\) which assigns a non-negative number for each triple consisting of the social welfare function, a bundle of total resources and an individual bundle. Now an efficient allocation is acceptable with respect to \(C\) if it induces individual contributions that are not lower than the respective contributions with the initial allocation. A contribution mechanism \(C\) is called admissible if it satisfies the five axioms introduced by the authors. It is then proved that there exists a unique admissible contribution mechanism, and that for any \(e\in E\), the set of acceptable allocations coincides with the set of Walrasian allocations.