Affiliation:
1. Department of Economics, Arizona State University, PO Box 879801, Tempe, AZ 85287-9801.
Abstract
Expected consumer's surplus rarely represents preferences over price lotteries. Still, I give sufficient conditions for policies which maximize aggregate expected surplus to be interim Pareto Optimal. Besides two standard partial equilibrium conditions, I assume that feasible prices satisfy a single-crossing property; and each consumer's indirect utility satisfies increasing differences in the price and income. I use the result to extend well-known welfare conclusions beyond the knife-edge quasilinear utility case. Since increasing differences puts no upper bound on risk aversion, the result is useful for applications in which risk aversion is important. (JEL D11, D24, D42, D81, D83, L42)
Publisher
American Economic Association
Subject
Economics and Econometrics
Cited by
8 articles.
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