Abstract
The notion of efficiency can be introduced both in terms of maximal utilities for given resources and in terms of minimal resources required by actual utilities. This paper provides the global characterization of efficient allocations by means of the sets of Pareto—maximal allocations and the sets of maximal distributable surplus allocations.
These sets are defined both with respect to given resources and with respect to given utilities. Equivalence and duality between these sets are demonstrated under an assumption of monotonicity between utilities and resources. The optimization of social welfare functions and social requirement functions is introduced and analyzed. The compensation principle is commented and its relation with efficiency ascertained. Finally, a social loss measure is introduced both in terms of utilities and in terms of resources.
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Montesano, A. (1997). Equivalence and Duality Between the Sets of Pareto-Maximal Allocations and the Sets of Maximal Distributable Surplus Allocations, Including Externalities. In: Battigalli, P., Montesano, A., Panunzi, F. (eds) Decisions, Games and Markets. Studies in Risk and Uncertainty, vol 8. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-6337-2_10
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DOI: https://doi.org/10.1007/978-1-4615-6337-2_10
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