Weakening transferable utility: The case of non-intersecting Pareto curves

Transferable utility (TU) is a widely used assumption in economics. In this paper, we weaken the TU property to the setting where distinct Pareto frontiers have empty intersections. We call this the no-intersection property (NIP). We show that the NIP is strictly weaker than TU, but still maintains several desirable properties. We discuss the NIP property in relation to several models where TU has turned out to be a key assumption: models of assortative matching, the Coase theorem and Becker's Rotten Kid theorem. We also investigate classes of utility functions for which theNIP holds uniformly.

[1]  R. Coase,et al.  The Problem of Social Cost , 1960, The Journal of Law and Economics.

[2]  A. Siow,et al.  Who Marries Whom and Why , 2006, Journal of Political Economy.

[3]  T. Scitovszky A Note on Welfare Propositions in Economics , 1941 .

[4]  J. Hicks The Foundations of Welfare Economics , 1939 .

[5]  L. Shapley,et al.  The assignment game I: The core , 1971 .

[6]  G. Becker Chapter Title: a Theory of Marriage a Theory of Marriage , 2022 .

[7]  Lones Smith,et al.  Sorting through Search and Matching Models in Economics , 2017 .

[8]  R. Blundell,et al.  Female Labour Supply, Human Capital and Welfare Reform , 2013, SSRN Electronic Journal.

[9]  G. Debreu Topological Methods in Cardinal Utility Theory , 1959 .

[10]  D. Primont,et al.  Duality, Separability, and Functional Structure: Theory and Economic Applications , 1978 .

[11]  M. Sono The Effect of Price Changes on the Demand and Supply of Separable Goods , 1961 .

[12]  P. Chiappori,et al.  Static and Intertemporal Household Decisions. , 2017, Journal of economic literature.

[13]  N. Kaldor The Philosophy of Economics: Welfare Propositions of Economics and Interpersonal Comparisons of Utility , 1939 .

[14]  Larry Samuelson,et al.  The Implementation Duality , 2015 .

[15]  Paul R. Milgrom,et al.  Monotone Comparative Statics , 1994 .

[16]  Marko Terviö Difference that CEOs Make: An Assignment Model Approach , 2007 .

[17]  Sergio Rebelo,et al.  Production, Growth and Business Cycles: Technical Appendix , 2002 .

[18]  P. Chiappori,et al.  The Marriage Market, Labor Supply, and Education Choice , 2015, Journal of Political Economy.

[19]  R. Cornes,et al.  Rotten Kids, Purity, and Perfection , 1999, Journal of Political Economy.

[20]  Patrick Legros,et al.  Beauty is a Beast, Frog is a Prince: Assortative Matching with Nontransferabilities , 2006 .

[21]  Leonid Hurwicz,et al.  What is the Coase Theorem , 1995 .

[22]  G. Clippel An axiomatization of the inner core using appropriate reduced games , 2008 .

[23]  D. M. Topkis Supermodularity and Complementarity , 1998 .

[24]  M. Kaneko The central assignment game and the assignment markets , 1982 .

[25]  G. Becker,et al.  A Theory of Social Interactions , 1974, Journal of Political Economy.

[26]  Wassily Leontief,et al.  Introduction to a Theory of the Internal Structure of Functional Relationships , 1947 .

[27]  T. Bergstrom A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries , 1989, Journal of Political Economy.

[28]  P. Legros,et al.  Co-Ranking Mates: Assortative Matching in Marriage Markets , 2010 .