New Developments in Social Choice and Bargaining Theory: Welfarism and Incomplete Information

Brown University, Providence RI

Investigators

Abstract

This research project has two main objectives. First, it offers an economic foundation of some classical solutions in the theories of social choice and bargaining by dropping the welfarist assumption. Second, it suggests possible ways of extending these two theories to problems with incomplete information. Most contributions in axiomatic bargaining and social choice are phrased in utilities. It is thus assumed, often implicitly, that two problems must have the same solution if they coincide in the utility space. Unfortunately, this welfarist assumption lacks both a clear normative and positive content, and is thus hard to accept as an axiom. This research project offers a better foundation of social choice and axiomatic bargaining by characterizing some of its main solutions in non-welfarist environments. Informational issues have long been recognized as central in economic theory. However, their implications on cooperation are still not yet well understood. Accordingly, Professor Aumann listed this topic as an important direction for future research in his 2000 presidential address to the Game Theory Society. To be more precise, an impressive amount of work has already been devoted to understand which contracts are feasible under asymmetric information, cf. the theory of mechanism design. Professors Hurwicz, Maskin, and Myerson were awarded the 2007 Sveriges riksbank prize in economic sciences in memory of Alfred Nobel for their path-breaking contributions on the topic. Yet very little is known about what specific contract, among those that are feasible, should or will be chosen. This project investigates many different avenues to extend the theories of bargaining and social choice to incomplete information. The theories of social choice and axiomatic bargaining are widely applied, yet the welfarist assumption on which it is founded is not compelling without justification. The present research project will show how some classical axiomatic systems can be completed to derive welfarist solutions in non-welfarist frameworks. Very little work has been done so far on social choice and bargaining under incomplete information, yet there is a clear need of going beyond the mere description of what is feasible. Broader Impact: This research proposal is foundational in its focus. The importance of the questions considered implies that it could have a significant impact on many different practical economic problems. The normative analysis under incomplete information should guide the economic and social debates, concerning, for instance, public health insurance, taxes, or cost sharing. Part of this research will be developed in collaboration with researchers from three other universities: Camelia Bejan (Rice U), David Perez-Castrillo (Universitat Autonoma de Barcelona, Spain), and David Wettstein (Ben Gurion University, Israel). The results of this research project will be integrated into a graduate-level course on information, risk and uncertainty that the investigator teaches at Brown University.