Efficiency under a Combination of Ordinal and Cardinal Information on Preferences

Consider a collection of m indivisible objects to be allocated to n agents, where m ≥ n. Each agent falls in one of two distinct categories: either he (a) has a complete ordinal ranking over the set of individual objects, or (b) has a set of “plausible” benchmark von Neumann-Morgenstern (vNM) utility functions in whose non-negative span his “true” utility is known to lie. An allocation is undominated if there does not exist a preference-compatible profile of vNM utilities at which it is Pareto dominated by another feasible allocation. Given an undominated allocation, we use the tools of linear duality theory to construct a profile of vNM utilities at which it is ex-ante welfare maximizing. A finite set of preference-compatible vNM utility profiles is exhibited such that every undominated allocation is ex-ante welfare maximizing with respect to at least one of them. Given an arbitrary allocation, we provide an interpretation of the constructed vNM utilities as subgradients of a function which measures worst-case domination.


Issue Date:
2011-02
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/101288
PURL Identifier:
http://purl.umn.edu/101288
Total Pages:
14
JEL Codes:
C61; D01; D60
Note:
Replaced with a revised version of paper 10/05/11.
Series Statement:
SD
11.2011




 Record created 2017-04-01, last modified 2020-10-28

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