Scitovsky Reversals and the Double Criteria Assignment Help

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Scitovsky Reversals and the Double Criteria:

Due to the change in policy in Figure there is a movement from R to S so that A gains and B looses but A can fully compensate B coming from S to R1  on U1U1' and still gain. It implies that S is better than R in terms of social welfare.

Let there be a move from S to R, resulting in the gain of B and loss of A.  B can compensate A fully by moving from R to S1 on U1U1' and still gain. It means point R is better to S in terms of social welfare. Simultaneously point R is better than S and S is better than R in the context of social welfare level contradicts each other and hence a paradox, known as Scitovsky Paradox  U1U1' and U1U1' are two different utility frontiers as  these two are not intersecting to each other in Figure. Movement from R to S makes B as the  gainer and A as the looser in terms of welfare.  Suppose the gainer B fully compensates A the looser by moving from S to S on  and still be  the gainer. 

It implies that S is better than R and social welfare increases as per Kaldor criterion. Applying Hicks criterion suppose the  looser A attempts to bribe B the gainer, not to insist on change of the policy. 

This may be possible if A can bribe B such that B can  achieve the level of utility at a level corresponding to point S at the minimum. 

This is not possible since the movement from R on the upward cannot reach to such an extent.  In other words A, the looser, cannot profitably bribe the gainer B. It fulfills Hicks criterion simultaneously avoiding Scitovsky Paradox.

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