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Published online by Cambridge University Press: 01 August 2014
The purpose of this note is to contribute to the analysis of various sorts of institutions for distributing goods to members of a society. The paper examines what happens when a society is faced with distributing ordinary private goods to its members. It can utilize three different sorts of institutions: a voting system, a price system, or a fixed proportions sharing rule. We suggest that a fixed proportions sharing rule generally will be found preferable by the society to majority rule. We argue that Shubik's assertion that a price system will dominate majority rule is not true without qualification.
The authors wish to express thanks to the Brookings Institution for support in the course of carrying out this research. Especial gratitude is due to Roger Noll of Brookings and Edwin Haefele of Resources for the Future for their insightful comments and criticism.
1 Shubik, Martin, “Voting, or a Price System in a Competitive Market Structure,” American Political Science Review, 64 (03, 1970) 179–81.CrossRefGoogle Scholar
2 The actors can evaluate potential distributions of wealth either before or after the actual distributions occur. We call prior evaluation ex ante and later evaluation ex post. The difference between ex ante and ex post evaluations is due to elimination of uncertainty.
3 The egalitarian point is the Nash equilibrium in the Cobb-Douglas case.
4 For α = β = γ, φ = χα γβ ζα = (xyz)α Thus (efg)α Mr l's utility from S 4, is the same as (fge)α, Mr. l's utility for S 5.
5 Buchanan, James and Tullock, Gordon, The Calculus of Consent (Ann Arbor: University of Michigan Press, 1965).Google Scholar
6 See Olson, Mancur, Logic of Collective Action (Cambridge: Harvard University Press, 1964).Google Scholar
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