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 S1 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.
![700_Scitovsky Reversals and the Double Criteria.png](https://www.expertsmind.com/../CMSImages/700_Scitovsky Reversals and the Double Criteria.png)
![401_Scitovsky Reversals and the Double Criteria1.png](https://www.expertsmind.com/../CMSImages/401_Scitovsky Reversals and the Double Criteria1.png)