Department of Economics

Faculty of Arts and Social Sciences

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Seminar - Upcoming

   
 
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2013 Asia Summer Institute in Behavioral Economics
Asian Meeting of the Econometric Society 2013
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Department Seminar

Topic:      

A Reformulation of the Axiomatic Foundations of Relative Utilitarianism

Speaker:
Tilman Borgers
University of Michigan
Date: March 03, Tuesday

Time: 4:00 - 5:30 pm
Venue:

Lim Tay Boh Seminar Room (AS2 03-12)
National University of Singapore
1 Arts Link, Singapore 117570

Chair:

Chen Yi-Chun

Abstract:

We consider the aggregation of individual von Neumann Morgenstern's utility functions into a society's von Neumann Morgenstern utility function. We start from Harsanyi's axiomatization of utilitarianism, and ask under which conditions a social preference order that satisfies Harsanyi's axiom uniquely reveals society's marginal rates of substitution between any agent i and j's utility. We then introduce three axioms for revealed marginal rates of substitution. Our main result is that the only welfare function that satisfies these three axioms is the relative utilitarian welfare function. This welfare function, which was introduced in Dhillon and Mertens (Econometrica, 1999), normalizes all agents' utility functions so that the lowest utility value is 0 and the highest utility value is 1, and then adds up the utility functions. The three axioms that we introduce are closely related to axioms that Dhillon and Mertens used to provide foundations for relative utilitarianism, but our axioms allow a much simpler and more transparent derivation of the main result.

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