CFDP 972

Strictly Fair Allocations in Large Exchange Economies

Author(s): 

Publication Date: March 1991

Pages: 27

Abstract: 

In this paper we introduce the concept of a strictly fair allocation and investigate the set of strictly fair allocations in large exchange economies. We prove that when agents’ utility functions are differentiable, the set of strictly fair allocations coincides with the set of equal-income Walrasian equilibria. This is shown using both the “limit theorem” approach the “limit economy” approach. We also extend the analysis to economies that have both atoms and an atomless sector. These results substantially improve upon the existing characterizations of equal-income Walrasian equilibria in terms of both economic efficiency and economic equity.

Keywords: 

Exchange economy, Walrasian equilibrium, resource allocation

JEL Classification Codes:  D51, D60, D58

See CFP: 813