Pareto efficiency in the jungle

Harold Houba, Roland Iwan Luttens*, Hans Peter Weikard

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We revisit the jungle economy of Piccione and Rubinstein (Econ J 117(July):883–896, 2007) in which the allocation of resources is driven by coercion. In this economy the unique equilibrium satisfies lexicographic maximization. We show that relaxing the assumptions on consumption sets and preferences slightly, allocations other than lexicographic maximizers can be jungle equilibria. We attribute this result to single unilateral taking where a stronger agent takes goods from only one weaker agent. Once multiple unilateral takings are introduced, we show that jungle equilibria coincide with lexicographic maximization under weak assumptions. However, we also present examples of equilibria that are Pareto inefficient, where voluntary gift giving by stronger agents is needed to achieve Pareto efficiency and even voluntary trade has a role in the jungle.

Original languageEnglish
Pages (from-to)153-161
Number of pages9
JournalReview of Economic Design
Volume21
Issue number3
DOIs
Publication statusPublished - 2017

Keywords

  • Coercion
  • Gift giving
  • Jungle economy
  • Pareto efficiency
  • Power
  • Trade

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