Efficiency, Equity, and Social Rationality under Uncertainty

Abstract

In a simple model where agents’ monetary payoffs are uncertain, this paper studies the aggregation of uncertainty preferences which are ordinal and interpersonally non-comparable. A maximin social welfare criterion is derived from axioms of efficiency, equity, and social rationality, as well as separability of unconcerned agents and independence of risk preferences in riskless situations. The criterion compares allocations based on the values of the prospects composed of the statewise minimum payoffs evaluated by the certainty equivalences.