<p>@HerrK. got it right in his comment (he should have deleted the somewhat confusing "yes" from the beginning and then posted it as an answer) It is possible that no pairwise improvements are possible but general Pareto-improvements are still possible. A simple counterexample for three actors and three goods is as follows. Let the utility functions be the same for all actors, that is
$$
U_A(x,y,z) = U_B(x,y,z) = U_C(x,y,z) = \min(x,y,z).
$$
Let actor $A$ have 3 units of good $x$, and 0 units of the other goods, whereas actor $B$ has 3 units of good $y$, and 0 units of the other goods, and actor $C$ has 3 units of good $z$, and 0 units of the other goods. No pairwise exchange can increase utilities above zero. But the goods could be distributed so that everyone has a unit of each. This would increase all utilities to one, making the original distribution not Pareto-efficient.</p>

CC BY-SA 3.0
2017-06-29T07:34:51.647Z
Like if A has three loafs of bread, B has peanut butter, and C has jam. B loves to eat peanut butter by itself, and C loves to eat jam by itself. None of them can stand to eat a sandwich with only one spreading, but they all love peanut butter and jelly sandwiches. P.S. You've got a typo in your equation.
bEPIK
CC BY-SA 3.0
2017-06-28T21:14:48.283Z
2017-06-29T08:15:56.333Z
2017-06-29T08:15:56.333Z
Giskard
<p>I've made a proof of Pareto efficiency of a funding system that I've developed. There are effectively four types of actors. I've shown all Pareto improvements are made between any two given parties are made (including between two actors within the same party). I believe that this proof by cases is valid, but I'm not 100% certain. My one concern is that maybe there is some tricky three-way or four-way trade that is somehow not captured in my proof. Thoughts?</p>

CC BY-SA 3.0
2017-06-28T17:07:47.217Z
Yes, you do have to consider those 3-way and 4-way cases in general.
Herr K.
<pareto-efficiency><proof>
Can one prove Pareto efficiency in an n-party system by showing all Pareto improvements between any two given parties are made?
bEPIK
# Can one prove Pareto efficiency in an n-party system by showing all Pareto improvements between any two given parties are made?

(Asked by: username_0 on 2017-06-28)

I've made a proof of Pareto efficiency of a funding system that I've developed. There are effectively four types of actors. I've shown all Pareto improvements are made between any two given parties are made (including between two actors within the same party). I believe that this proof by cases is valid, but I'm not 100% certain. My one concern is that maybe there is some tricky three-way or four-way trade that is somehow not captured in my proof. Thoughts?

**Tags:** pareto-efficiency, proof

> **Comments:**
> **username_1**: Yes, you do have to consider those 3-way and 4-way cases in general.  

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## 1 answers

### Answer by username_2 on 2017-06-28. Score: 2 | Accepted answer

@HerrK. got it right in his comment (he should have deleted the somewhat confusing "yes" from the beginning and then posted it as an answer) It is possible that no pairwise improvements are possible but general Pareto-improvements are still possible. A simple counterexample for three actors and three goods is as follows. Let the utility functions be the same for all actors, that is
$$
U\_A(x,y,z) = U\_B(x,y,z) = U\_C(x,y,z) = \min(x,y,z).
$$
Let actor $A$ have 3 units of good $x$, and 0 units of the other goods, whereas actor $B$ has 3 units of good $y$, and 0 units of the other goods, and actor $C$ has 3 units of good $z$, and 0 units of the other goods. No pairwise exchange can increase utilities above zero. But the goods could be distributed so that everyone has a unit of each. This would increase all utilities to one, making the original distribution not Pareto-efficient.

> **Comments:**
> **username_0**: Like if A has three loafs of bread, B has peanut butter, and C has jam. B loves to eat peanut butter by itself, and C loves to eat jam by itself. None of them can stand to eat a sandwich with only one spreading, but they all love peanut butter and jelly sandwiches. P.S. You've got a typo in your equation.  

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