On fair allocations

This paper examines the effects of fairness on economic behavior and allocations, where fairness is defined as the absence of envy among consumers. We use the benefit function to investigate the welfare cost of fairness. We show how fairness generates a form of altruism, captured by a “fair expenditure” function that depends on the distribution of welfare. We define the most efficient fair allocations and explore the implications of fairness for economic behavior, pricing and redistribution policies.