micro-fall2007-20 - Allocation and Redistribution...

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Allocation and Redistribution Allocation and redistribution Welfare functions represent social norms and values. Example Welfare functions: 1 Utilitarian welfare functions: W ( u A ; u B ) = u A + u B . 2 W ( u A ; u B ) = min f u A ; u B g . 3 Bargaining solution: W ( u A ; u B ) = ( u A ¯ u A ) α A ( u B ¯ u B ) α B . Ani Guerdjikova ECON 313 Fall 2007 197 / 216
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Allocation and Redistribution The welfare functions take into account only . They neglect: ( i ) the decision-making procedure; ( ii ) the initial set of alternatives. Ani Guerdjikova ECON 313 Fall 2007 198 / 216
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Market Failure Market Failure Market failure occurs when preferences and technologies of consumers interdependent. Market failure results from non-market interactions between economic agents. Ani Guerdjikova ECON 313 Fall 2007 199 / 216
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Market Failure "! # H A "! # H
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This note was uploaded on 04/30/2008 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell University (Engineering School).

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micro-fall2007-20 - Allocation and Redistribution...

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