Open AccessFairness and externalities
Author(s) -
Velez Rodrigo A.
Publication year - 2016
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te1651
Subject(s) - externality , equity (law) , foley , microeconomics , economics , consumption (sociology) , domain (mathematical analysis) , optimal allocation , test (biology) , computer science , business , mathematical optimization , mathematics , mathematical analysis , social science , paleontology , sociology , advertising , political science , law , biology
We study equitable allocation of indivisible goods and money among agents with other‐regarding preferences. First, we argue that Foley's (1967) equity test, i.e., the requirement that no agent prefers the allocation obtained by swapping her consumption with another agent, is suitable for our environment. Then we establish the existence of allocations passing this test for a general domain of preferences that accommodates prominent other‐regarding preferences. Our results are relevant for equitable allocation among inequity‐averse agents and in a domain with linear externalities that we introduce. Finally, we present conditions guaranteeing that these allocations are efficient.