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The Pure Compensation Problem: Egalitarianism Versus Laissez-Fairism

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  • Hervé Moulin

Abstract

A binary choice problem with side-payments and quasi-linear utilities is considered. We study two compensation rules, called social choice functions. The egalitarian rule divides equally the surplus above the average utility level. The laissez-faire rule chooses an efficient decision but performs no transfer. Egalitarianism is characterized by a monotonicity axiom called Agreement: no two agents ever disagree in comparing two distinct preferences of a third one. Laissez-fairism is characterized by the No Subsidy axiom: a coalition would not be worse off if the other agents were not present.

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  • Hervé Moulin, 1987. "The Pure Compensation Problem: Egalitarianism Versus Laissez-Fairism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(4), pages 769-783.
    • Handle: RePEc:oup:qjecon:v:102:y:1987:i:4:p:769-783.
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