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Published March 2011 | Version Campus-Access Only
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Implications of Pareto efficiency for two-agent (household) choice

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Abstract

We study when two-member household choice behavior is compatible with Pareto optimality. We ask when an external observer of household choices, who does not know the individuals' preferences, can rationalize the choices as being Pareto-optimal. Our main contribution is to reduce the problem of rationalization to a graph-coloring problem. As a result, we obtain simple tests for Pareto optimal choice behavior. In addition to the tests, and using our graph-theoretic representation, we show that Pareto rationalization is equivalent to a system of quadratic equations being solvable.

Additional Information

© 2011 Elsevier B.V. Received 27 February 2010; revised 11 September 2010; accepted 4 January 2011. Available online 26 January 2011. We thank Leeat Yariv for comments on an earlier draft. We are also very grateful to an anonymous referee for his/her thoughtful comments. Our research was supported by the Lee Center at Caltech.

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Additional details

Identifiers

Eprint ID
24396
DOI
10.1016/j.jmateco.2011.01.001
Resolver ID
CaltechAUTHORS:20110713-073733616

Related works

Describes
10.1016/j.jmateco.2011.01.001 (DOI)

Funding

Caltech Lee Center

Dates

Created
2011-07-13
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Updated
2021-11-09
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