Pareto Efficient Allocation Of Resources Research Articles

A Legalistic Conception of the Market: Beyond Efficiency

This paper argues that the standard picture of the market is flawed not merely in practice but also, and especially, in principle. The basic difficulty with the standard picture is that trading (with contracts) gives rise to a form of recognition that is preference-independent and, therefore, that market participants cannot wish away its negative and positive effects on non-trading parties. The paper argues on the basis of this that such effects undermine the possibility of identifying the market with Pareto efficiency—to wit, the first fundamental theorem of welfare economics, showing that perfect competition yields Pareto efficient allocation of resources, cannot hold for market exchange that takes the contract form of interaction.

Efficient mechanism for resource allocation with quadratic payments and its realization via an iterative bargaining process

The problem of Pareto-efficient resource allocation among rational agents is considered. The mechanism that implements efficient allocation as Nash equilibrium in case when utility is transferable among agents is offered. The approach to solution of allotment problems as multicriteria public choice problems lies in the basis of this mechanism, that allows to implement Groves-Ledyard mechanism, which was initially designated to the solution of public good problems. It is shown, that there is exist the only Nash equilibrium in a game among agents induced by the mechanism developed. For the case when utility functions are private information of agents, it is shown, that efficient allocation may be realized via an iterative bargaining process based on this mechanism, if agents behave according to Cournot dynamics. Possibility to reduce agent's messages space to a scalar one in iterative bargaining process is demonstrated. It is also shown that mechanism developed may be inconsistent for some nontrivial agent's behavior – there exist some game solutions which can be reached via iterative bargaining process but are not Nash equilibrium and don't yield efficient resource allocation.

Helping others or helping oneself? International subsidies and the provision of global public goods

This paper explores the welfare effects of international subsidies designed to expedite the production of global public goods. It distinguishes between the impact subsidies exert on behaviour and the impact subsidies exert on welfare. Subsidies that encourage recipients to contribute to the provision of global public goods can be designed to maximize the welfare of donor countries. While these optimal subsidies achieve a Pareto efficient allocation of resources, all the efficiency gains are appropriated by donor countries. If equity is irrelevant, optimal subsidies are higher for high-income recipients than for low-income recipients.

On Pareto-Efficiency Between Profit and Utility in OFDM Resource Allocation

In the offering of broadband wireless services a common objective for a service provider (carrier) is to choose a resource allocation policy for multiple service classes that maximizes profit. However, when doing so the policy may not be utility-optimal. This causes users to decrease their consumption, which leads to a decrease of profit for service providers. Therefore, a service provider should choose a Pareto-efficient resource allocation policy so that both the profit of the service provider and the utility of the users can be optimally balanced. In this paper, we develop a framework for finding the necessary and sufficient condition for Pareto-efficiency, derive the Pareto-efficient resource allocation policies and propose an efficient solution for achieving it in Orthogonal Frequency Division Multiplexing systems.

The Impact on Nutrition of the Intrahousehold Distribution of Power

The distribution of income within the household is found to matter for the allocation of resources towards nutrition. Rural Mexican households do not pool income, nor do they attain a Pareto-efficient allocation of resources. In contrast to what is commonly done in the literature, I do not assume that only the head of household and his wife share the decision-making. In particular, I present a new test of the unitary model in the context of extended families, which acknowledges that any household member may participate to the decision-making as long as he or she earns some income. I find that a change in the number of income earners is associated with a change in food calorie consumption controlling for the change in household size and household income. Both the number and identities of income earners matter in the extended family. In particular, when a female household member starts earning income, food consumption increases substantively. When it is a male household member who starts earning income, it decreases substantively.

Status effects and environmental externalities

This paper examines a static, competitive economy where the production of a consumption good generates pollution that adversely affects human welfare. Preferences are defined over consumption, leisure, pollution, and economic status. Each person's status increases with her own consumption, but decreases with the average consumption of society. The achievement of a Pareto efficient resource allocation requires a consumption tax to offset the incentive to overconsume in the pursuit of enhanced status. In contrast with standard prescriptions, the efficient pollution tax generally exceeds the sum of individuals' marginal willingness to pay for pollution abatement. These findings remain unaltered when preferences are modified to incorporate altruistic concern for others' well-being. Altruism, however, suggests a potential role for government intervention to achieve a desirable (i.e., Pareto efficient) distribution of welfare between individuals.

On informational efficiency and incentive aspects of generalized ratio equilibria

In this paper, we investigate the informational efficiency and incentive aspects of the Generalized Ratio Equilibrium (GRE) rule in public goods economies with general variable returns and by-product technologies. We extend Hurwicz's (1979a) results to the cases of non-constant returns and prove that any implementable social choice correspondence that selects Pareto efficient and autarkically individually rational allocations contains GRE allocations, and conversely, the set of GRE allocations contains the interior points of the correspondence. Moreover, we prove that the GRE process is informationally the most efficient process among informationally decentralized and Pareto efficient resource allocation processes and thus that the minimal message space needed for the GRE correspondence is never larger than that needed for the Lindahl correspondence, and that when by products technologies are present, it is smaller than that needed by the Lindahl correspondence.

Intergenerational transfers and the social discount rate

This paper investigates the relationship between intergenerational asset transfers and the choice of the discount rate for use in cost-benefit analysis in a model of a competitive overlapping generations economy constrained by a socially managed exhaustible resource. Provided that there are no distortions in capital markets and that all agents hold perfect foresight, cost-benefit techniques will result in a Pareto efficient resource allocation if the discount rate is set equal to the market rate of interest. But since the path of the interest rate depends on the level of intergenerational transfers, cost-benefit techniques do not ensure a socially desirable distribution of welfare between generations; a social optimum will result only if intergenerational transfers are properly chosen and enforced. Decentralized private altruism may result in intergenerational transfers that both present and future individuals would agree are too small if members of the present generation attach positive weight to the general welfare of future generations, not simply their personal descendants. In a world where intergenerational transfers are non-optimal, second-best policy-making may imply a constrained optimum that is inefficient. Together, these findings suggest that cost-benefit analysis is at best a partial criterion to policy formulation that should be used only in conjunction with ethical principles that define the proper distribution of welfare between present and future generations.

Can Neoclassical Economics Underpin the Reform of Centrally Planned Economies?

This paper addresses whether neoclassical economics can provide the intellectual underpinning for a theory of reform. I examine whether the neoclassical model satisfies an essential condition to qualify for this role: does it give us a satisfactory explanation for the vast differences in performance between capitalist and socialist economic systems? First, I focus on the theoretical arguments that have traditionally been used to examine the comparative properties of central planning and markets. I show that developments within theory over the last 20 years have substantially changed the tone of these arguments, making their message more equivocal. Next I discuss empirical evidence, but of a particular sort. Much research shows that centrally planned economies perform less well than market economies; but few studies test whether the superiority of market economies appears within empirical models derived using the framework of basic neoclassical economics. Those studies are the relevant ones for the present exercise. The central conclusion is that economists must look outside the standard models of competition, the focus on Pareto-efficient resource allocation, and the welfare theorems to build a theory of reform.

On the Efficiency of Matching and Related Models of Search and Unemployment

This paper describes a simple framework for evaluating the allocative performance of economies characterized by trading frictions and unemployment. This framework integrates the normative results of earlier Diamond-Mortensen-Pissarides bilateral matching-bargaining models of trade coordination and price-setting, and consists of a set of general conditions for constrained Pareto efficient resource allocation that are applicable to conventional natural rate models. To illustrate, several conventional models of the labour market are reformulated as matching-bargaining problems and analyzed using this framework.

The Coase Theorem and Coalitional Stability

It is the contention of this paper that the Coase theorem has yet to be formulated and proved in a rigorous manner. The problem addressed is that of strategic coalitional behaviour when more than two agents are involved in the externality. It is shown that there are examples for which non-efficient allocations are stable in the sense of Aumann-Maschler bargaining sets, thereby vitiating the Coase theorem. Hence a proper formulation of the Coase theorem must exclude bargaining set stability. It is our contention that the Coase theorem-which asserts that, with zero transaction costs and zero income effects, the identical Pareto-efficient allocation of resources will emerge regardless of the initial assignment of property rights-has yet to be formulated and proved in a rigorous manner.' The problem addressed here is that of strategic coalitional behaviour when more than two agents are involved in the externality. For the Coase theorem to hold in such situations, two conditions are important. First, assuming that the maximum joint payoff can be effected only by the formation of the grand coalition (e.g. by the merger of all parties involved in the externality), the grand coalition must be stable. Second, only the grand coalition must be stable; for if some other coalition is also stable, then the latter may form instead of the grand coalition so that a Pareto-optimal allocation need not obtain. The point of this note is to show that a rigorous statement of the Coase theorem must exclude bargaining set notions of coalitional stability because,

Market Structure, Innovation, and Optimal Patent Life

Previous article No AccessMarket Structure, Innovation, and Optimal Patent LifeLawrence M. DeBrockLawrence M. DeBrock Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by The Journal of Law and Economics Volume 28, Number 1Apr., 1985 Sponsored by The University of Chicago Booth School of Business and The University of Chicago Law School Article DOIhttps://doi.org/10.1086/467081 Views: 26Total views on this site Citations: 19Citations are reported from Crossref Copyright 1985 The University of ChicagoPDF download Crossref reports the following articles citing this article:Gaétan de Rassenfosse, Adam B. Jaffe Are patent fees effective at weeding out low-quality patents?, Journal of Economics & Management Strategy 27, no.11 (Aug 2017): 134–148.https://doi.org/10.1111/jems.12219Giulia Lechthaler-Felber and Frank C. Krysiak Quota Markets and Technological Change, Journal of the Association of Environmental and Resource Economists 4, no.44 (Oct 2017): 1199–1228.https://doi.org/10.1086/693136Gaatan de Rassenfosse, Adam B. Jaffe Are Patent Fees Effective at Weeding Out Low-Quality Patents?, SSRN Electronic Journal (Jan 2017).https://doi.org/10.2139/ssrn.3012770Pasquale L. Scandizzo, Marco Ventura Innovation and imitation as an interactive process, Economics of Innovation and New Technology 25, no.88 (Mar 2016): 821–851.https://doi.org/10.1080/10438599.2016.1164985Gaatan de Rassenfosse, Adam B. Jaffe Are Patent Fees Effective at Weeding Out Low-Quality Patents?, SSRN Electronic Journal (Jan 2015).https://doi.org/10.2139/ssrn.2545714Gaatan de Rassenfosse, Alexandra K. Zaby The Economics of Patent Backlog, SSRN Electronic Journal (Jan 2015).https://doi.org/10.2139/ssrn.2615090Hwan C. Lin Creative Destruction and Optimal Patent Life in a Variety-Expanding Growth Model, Southern Economic Journal (Dec 2013): 131223135728009.https://doi.org/10.4284/0038-4038-2013.078Aniruddha Bagchi, Abhra Roy Endogenous Research and Development and Intellectual Property Laws in Developed and Emerging Economies, Southern Economic Journal 78, no.33 (Jan 2012): 895–930.https://doi.org/10.4284/0038-4038-78.3.895Frank C. Krysiak Environmental regulation, technological diversity, and the dynamics of technological change, Journal of Economic Dynamics and Control 35, no.44 (Apr 2011): 528–544.https://doi.org/10.1016/j.jedc.2010.12.004Egon Franck Beiträge der Neuen Institutionenökonomik zum Innovationsmanagement, Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung 58, no.S54S54 (Aug 2016): 58–85.https://doi.org/10.1007/BF03372943Bonwoo Koo, Brian D. Wright Economics of Patenting an Input Essential to Further Research, (Jan 2003): 331–346.https://doi.org/10.1007/978-1-4757-3750-9_15William E. Jackson, Purushottaman Nandakumar, Aleda V. Roth Market structure, consumer banking, and optimal level of service quality, Review of Financial Economics 12, no.11 (Jan 2003): 49–63.https://doi.org/10.1016/S1058-3300(03)00006-5Louise C. Keely Using Patents In Growth Models, Economics of Innovation and New Technology 10, no.66 (Jan 2001): 449–492.https://doi.org/10.1080/10438590100000018Emmanuel Duguet, Isabelle Kabla Appropriation Strategy and the Motivations to use the Patent System: an Econometric Analysis at the Firm Level in French Manufacturing, (Jan 2000): 267–305.https://doi.org/10.1007/978-1-4757-3194-1_11Vincenzo Denicolò The optimal life of a patent when the timing of innovation is stochastic, International Journal of Industrial Organization 17, no.66 (Aug 1999): 827–846.https://doi.org/10.1016/S0167-7187(97)00061-1Otmar Rafeiner, Ingrid Weidinger Industrial property protection: Insurance for innovation, Technology, Law and Insurance 4, no.1-21-2 (Mar 1999): 3–12.https://doi.org/10.1080/135993799349054Friedrich Breyer, Peter Zweifel Der Arzneimittelmarkt, (Jan 1992): 341–368.https://doi.org/10.1007/978-3-662-07483-1_10Richard E. Romano Benefits of competition for patents, Information Economics and Policy 4, no.11 (Jan 1989): 31–43.https://doi.org/10.1016/0167-6245(89)90031-0Owen T. Adikibi The multinational corporation and monopoly of patents in Nigeria, World Development 16, no.44 (Apr 1988): 511–526.https://doi.org/10.1016/0305-750X(88)90201-X

Consumption Externalities in Models of Urban Transportation

A two-sector, two-commodity model, in which the consumption externalities of one good are treated as public “bads,” is used to evaluate diagrammatically the case for consumption subsidies for the other good. The model is discussed within the context of urban transportation where public bads are assumed to be generated by the consumption of private transportation. Of particular interest is whether a transfer of purchasing power through public transportation subsidies from one (higher-income) group to the other (lower-income) group can, by reducing the consumption of private transportation by the latter, improve the respective welfare levels of both parties (i.e., produce a Paretian improvement). It is shown that while a subsidy may result in a Pareto efficient allocation of resources, the likelihood of Paretian improvements is remote. The equity and efficiency implications of alternative subsidy proposals are also examined.