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A Free and Fair Economy: A Game of Justice and Inclusion

Author

Listed:
  • Ghislain H. Demeze-Jouatsa
  • Roland Pongou
  • Jean-Baptiste Tondji
Abstract
Frequent violations of fair principles in real-life settings raise the fundamental question of whether such principles can guarantee the existence of a self-enforcing equilibrium in a free economy. We show that elementary principles of distributive justice guarantee that a pure-strategy Nash equilibrium exists in a finite economy where agents freely (and non-cooperatively) choose their inputs and derive utility from their pay. Chief among these principles is that: 1) your pay should not depend on your name, and 2) a more productive agent should not earn less. When these principles are violated, an equilibrium may not exist. Moreover, we uncover an intuitive condition -- technological monotonicity -- that guarantees equilibrium uniqueness and efficiency. We generalize our findings to economies with social justice and inclusion, implemented in the form of progressive taxation and redistribution, and guaranteeing a basic income to unproductive agents. Our analysis uncovers a new class of strategic form games by incorporating normative principles into non-cooperative game theory. Our results rely on no particular assumptions, and our setup is entirely non-parametric. Illustrations of the theory include applications to exchange economies, surplus distribution in a firm, contagion and self-enforcing lockdown in a networked economy, and bias in the academic peer-review system. Keywords: Market justice; Social justice; Inclusion; Ethics; Discrimination; Self-enforcing contracts; Fairness in non-cooperative games; Pure strategy Nash equilibrium; Efficiency. JEL Codes: C72, D30, D63, J71, J38

Suggested Citation

  • Ghislain H. Demeze-Jouatsa & Roland Pongou & Jean-Baptiste Tondji, 2021. "A Free and Fair Economy: A Game of Justice and Inclusion," Papers 2107.12870, arXiv.org.
    • Handle: RePEc:arx:papers:2107.12870
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    References listed on IDEAS

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    More about this item

    Keywords

    market justice; social justice; inclusion; ethics; discrimination; self-enforcing contracts; fairness in non-cooperative games; pure strategy nash equilibrium; efficiency. jel codes: c72; d30; d63; j71; j38;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D30 - Microeconomics - - Distribution - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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