A necessary and sufficient condition for Walrasian social choice (Q1321546): Difference between revisions

The paper characterizes Walrasian equilibria by axioms of social choice which reflect ethical, informational and rationality concepts. A sketch of some aspects of the paper follow. An economy in the abstract is symbolized by a list of consumption sets \(X= (X_ i)\), utility functions \(u= (u_ i)\), initial endowments \(\omega= (\omega_ i)\), an aggregate production set \(Y\) and shares \(\theta= (\theta_ i)\) of processes or profit, where \(i= 1,\dots,m\) stand for the consumers. The assumptions, the concepts of allocations, competitive equilibrium, core allocations, and that of replicated economies and the notion of convergence of core allocations to competitive equilibrium are ones that are standard in the literature of competitive equilibrium and of core in cooperative game theory. If \(E\) is a family of standard economies \(E= (x,u,\omega,\theta,Y)\), a social choice rule is a correspondence \(f\) from \(E\) to the set of feasible allocations for each \(E\) in \(E\). The Walras rule associates to each \(E\) in \(E\) the set of competitive equilibrium allocations for \(E\). As is usual in Social Choice Theory, the domain of \(f\) is important. The implications and necessity of two types of domain conditions are explored. One of them, the condition D-2, requires that the domain is a) broad enough to include within the admissible class of utility functions those in which all consumers have identical linear utility functions for each possible choice of the weights in the linear utility function, but b) is restricted to production sets \(Y\) satisfying constant returns to scale. \(f\) satisfies the Core Property (C) means that \(f(E)\) is contained in the set of all core allocations of \(E\) for each \(E\) in \(E\). It satisfies non-discrimination (ND) means that, for each \(E\), if any two allocations provide the same utility levels (in the two allocations) to each individual and one of the allocations is in \(f(E)\) then so is the other. \(f\) satisfies Monotonicity (M) means the following: suppose \(E^ 1\) and \(E^ 2\) are two economies which are identical in all respects except the utility functions; suppose also that \(z\) in \(f(E^ 1)\) satisfies that, for each individual, consumption points \(x_ i\) which were (weakly) inferior to its consumption point in \(z\), \(x^ 1_ i\), remain so under the new utility function in \(E^ 2\), then \(z\) is also in \(f(E^ 2)\). \(f\) is Locally Decisive (LD), loosely paraphrased, means that when replications of an economy \(E\) is considered, social choice is based only on information about the original economy \(E\). The following characterization is proved: assume D-2; the Walras rule is the only social choice rule which satisfies C, ND, M and LD. The various assumptions are understood to be given obvious reformulations in the context of replicated economies. LD may be replaced by the condition of Stability under Replications familiar in the literature.