Market Justice vs. Egalitarianism: The Role of the Alpha Parameter in Economic Equilibrium

Table of Links

Abstract and 1. Introduction

1. A free and fair economy: definition, existence and uniqueness

   2.1 A free economy

   2.2 A free and fair economy

2. Equilibrium existence in a free and fair economy

   3.1 A free and fair economy as a strategic form game

   3.2 Existence of an equilibrium

3. Equilibrium efficiency in a free and fair economy

4. A free economy with social justice and inclusion

   5.1 Equilibrium existence and efficiency in a free economy with social justice

   5.2 Choosing a reference point to achieve equilibrium efficiency

5. Some applications

   6.1 Teamwork: surplus distribution in a firm

   6.2 Contagion and self-enforcing lockdown in a networked economy

   6.3 Bias in academic publishing

   6.4 Exchange economies

6. Contributions to the closely related literature

7. Conclusion and References

Appendix

5.1 Equilibrium existence and efficiency in a free economy with social justice

In what follows, we study the existence of equilibrium in an α-free economy with social justice. As defined in Section 3.1, a free economy with social justice admits an equilibrium if the strategic form game derived from that economy possesses a pure strategy Nash equilibrium. A meritocratic planner will choose a higher α when allocating resources since talents and merits have more value in such a society. An egalitarian planner will put a higher weight on equal distribution. It follows that a choice of α reveals a trade-off between market justice and egalitarianism. The good news is that there exists a self-enforcing social contract irrespective of the size of α. We have the result hereunder.

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\ The proof of Corollary 1 is similar to that of Theorem 2. Next, we provide an additional result about Pareto-efficiency of equilibria in a free economy with social justice.

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\ Using Theorem 4, we deduce the following corollary.

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:::info Authors:

(1) Ghislain H. Demeze-Jouatsa, Center for Mathematical Economics, University of Bielefeld (demeze jouatsa@uni-bielefeld.de);

(2) Roland Pongou, Department of Economics, University of Ottawa (rpongou@uottawa.ca);

(3) Jean-Baptiste Tondji, Department of Economics and Finance, The University of Texas Rio Grande Valley (jeanbaptiste.tondji@utrgv.edu).

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:::info This paper is available on arxiv under CC BY 4.0 DEED license.

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