Pareto Efficiency with Different Beliefs

Gabrielle Gayer, Itzhak Gilboa, Larry Samuelson, and David Schmeidler

Pareto efficiency is not as compelling when people hold different beliefs as it is under common beliefs or certainty.
 

Gilboa, Samuelson, and Schmeidler (2013) have suggested that the standard Pareto relation be weakened by imposing the additional constraint that, in order for one allocation to dominate another, there should exist a single hypothetical belief under which all agents prefer the former to the latter.
 

In the present work we propose an alternative definition whereby Pareto efficiency is supplemented by the requirement that according to each agent`s belief the former alternative is preferred to the latter for all other agents.
 

This paper analyzes and compares these and other definitions

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