Social Choice and Welfare

Course Outline:
Social welfare function
Preference relations and individual choice
Properties of preference relation, existence of choice function
and maximal element
Examples of social welfare function; simple majority rule and
Borda rule
Properties of social welfare function
Arrows impossibility theorem
Paretian Liberal Paradox
Solution concepts of cooperative game theory
Core
Shapley value
Bargaining solutions

Allocation Rules
Bankruptcy problem

Matching
Gale Shapley algorithm
Collective decision making based on the decisions of the
individuals. The decisions at the societal level is based on the
decisions of the individuals constituting the society. Example :
Direct democracy, Decision of a committee - interview board.
The individuals make decisions. To study the procedures to
aggregate the decisions of the individuals to get a decision of
the group ( the collective decision) constituting these
individuals. This group may be a society.
Voting system is a way to aggregate the decision of the
individuals to reach a collective decision or the decision of the
society. We study the voting rules.
We want the voting rules to satisfy certain properties. These
properties are normative properties like there should not be
any dictator.
Example:
Suppose there are fifteen individuals in a society. These individuals
have to choose one candidate as mayor from three alternative
candidates A, B and C.
Number of individuals Best Second Third
6 A C B
5 B C A
4 C A B
A should be selected as mayor. The highest number of voters have
chosen A as the best alternative, when only one option is to be
chosen.
Plurality voting method or First past the post voting method when
only one candidate needs to be selected.
Suppose the voters are asked to give their whole preference profile,
like best alternative, second one and third one.
If we do pairwise comparison, we get the following result:
In case of A, B, we see that A is preferred to B by 10 voters and B
is preferred to A by 5. So in this pair A is preferred to B.
In case of A, C, we see that A is preferred to C by 6 voters and C
is preferred to A by 9 voters. So in this pair C is preferred to A.
In case of B, C, we see that B is preferred to C by 5 voters and C
is preferred to B by 10 voters. So in this pair C is preferred to B.
The outcome is C is preferred most so it should be chosen.
This is simple majority rule.
Now suppose we attach points to each position, best, second and
third. The weights are the best option gets 2, second gets 1 and
third get 0. We choose the alternative having maximum points.
We get the following table
A B C
6 × 2 = 12 5 × 2 = 10 4×2=8
4×1=4 0 11 × 1 = 11
5 × 0 = 0 11 × 0 = 0 0
16 10 19
We get that option C gets the maximum points. So it is the
winner. This is Borda method.
We see that as we change the voting rule or method, the outcome
may change.
It is based on the individual preferences over the alternatives so we
first study individual preferences and choice. Based on individual
preferences we build the social welfare function.
Preference profile of individual:
A B C
C C A
B A B
6 5 4
   
A B C A
f C C A  = B 
B A B C
In the first voting method.
    
A B C C
f C C A = A
B A B B
In the second and third voting method.
What kind of coalition can be formed? How to share the total
value of a coalition. For example surplus sharing of joint
partnership. Sharing among a group of people. Revenue
sharing among different service providers. We study solution
concept like core, Shapely value and Nash Bargaining.
We study allocation rules, proportional rule, constrained equal
awards rule, constrained equal loss rule etc. We study them in
the context of bankruptcy problem.
Matching: matching of students to college, matching of room
mates.
Books:
Insights into game theory An alternative mathematical
experience, by Ein-Ya Gura and Michael B. Maschler
Collective choice and Social welfare , by Amarty Sen
A primer in Social Choice Theory, by Wulf Gaertner