Markus Brunnermeier, Princeton University and NBER; Alp Simsek, Harvard University and NBER; and Wei Xiong, Princeton University and NBER, "A Welfare Criterion
for Models with Distorted Beliefs"
Explicit in all these works is that antitrust agencies face a national welfare criterion of which foreign producers and consumers are not part; yet consumer surplus (not national welfare) is the stated criterion for many antitrust agencies.
Sorgard's (1997) study follows closely Barros and Cabral's work (adopting the infinitesimal method, the lack of merger synergies, and postmerger price increases), but discards the external effect criterion for a national welfare criterion.
If one disagrees with a policy being advocated, that disagreement necessarily reflects disagreement with the economic model, the welfare criterion, or assumptions about institutional features of policy.
The reasons for this ambiguity were suggested at the outset; they involve disagreements about the appropriate welfare criterion and about the nature of policy institutions.
The first and second differ according to whether the welfare criterion is steady state welfare or present value welfare, whereas the second and third differ according to an institutional assumption that changes the set of feasible policies.
The author's stated goal is to develop, within the bounds of Austrian theory, a welfare criterion that can be used to judge and possibly improve economic efficiency when market failure, i.
On a grander scale, the welfare criterion, catallactic efficiency, is judged by the extent to which market activity encourages economic efficiency, i.
Razin and Loungani analyze how globalization induces monetary authorities, guided by the welfare criterion
of a representative household, to put greater emphasis on reducing the inflation rate than on narrowing output gaps.
To allow the average consumer's preferences to determine the pricing structure faced by all consumers represents a misapplication of the Harberger welfare criterion.
Professor Wenders has shown that if the only fixed costs a company incurs are customer specific, flat-rate pricing is not sustainable if it is applied throughout the market even when it dominates LMS on an "average consumer" welfare criterion.
On the other hand she praises Pigou's "nontrivial welfare criterion
which deals with issues concerning both equity and efficiency" [2, 616].