Fair Welfare Maximization

We consider the general problem of finding fair constrained resource allocations. As a criterion for fairness we propose an inequality index, termed “fairness ratio,” the maximization of which produces Lorenz-undominated, Pareto-optimal allocations. The fairness ratio does not depend on the choice of any particular social welfare function, and hence it can be used for an a priori evaluation of any given feasible resource allocation. The fairness ratio for an allocation provides a bound on the discrepancy between this allocation and any other feasible allocation with respect to a large class of social welfare functions. We provide a simple representation of the fairness ratio as well as a general method that can be used to directly determine optimal fair allocations. For general convex environments, we provide a fundamental lower bound for the optimal fairness ratio and show that as the population size increases, the optimal fairness ratio decreases at most logarithmically in what we call the “inhomo-geneity” of the problem. Our method yields a unique and “balanced” fair optimum for an important class of problems with linear budget constraints.


Published in:
Economic Theory, 41, 3, 465-494
Year:
2009
Publisher:
Springer Verlag
ISSN:
0938-2259
Laboratories:




 Record created 2013-07-15, last modified 2018-03-17

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