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Market-Based Solutions to Vital Economic Issues
Research
Jul 1, 2012

An Inequality Measure for Stochastic Allocations

Abstract

Few papers in the literature on inequality measurement deal with uncertainty, particularly when the ranking of cohorts may not be fixed. We present a set of axioms implying such a class of inequality measures under uncertainty that is a one-parameter extension of the generalized Gini mean over the distribution of average allocations. The extension consists of a quadratic term accounting for inter-personal correlations. In particular, our measure can simultaneously accommodate a preference for “shared destiny”, a preference for probabilistic mixtures over unfair allocations, and a preference for fairness “for sure” over fairness in expectation.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


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