Discussion Papers of Business and Economics
Department of Business and Economics, University of Southern Denmark
Welfare Egalitarianism with Other-Regarding Preferences
Abstract: We study the fair allocation of a one-dimensional and
perfectly divisible good when individuals have other-regarding preferences.
Assuming no legitimate claims and purely ordinal preferences, how should
society measure social welfare so as to satisfy basic principles of
efficiency and fairness? We define the egalitarian equivalent as the size
of the egalitarian allocation which leaves the individual indifferent to
the current allocation. In two simple models of average and positional
externalities, we characterize the class of social preferences which give
full priority to the individual with the lowest egalitarian equivalent in
Keywords: Fair allocation; social welfare; externalities; behavioral economics; (follow links to similar papers)
JEL-Codes: D62; D63; D64; D71; (follow links to similar papers)
32 pages, December 19, 2014
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