GIFT EQUILIBRIA AND PARETO-OPTIMALITY RECONSIDERED

Goldman (Gift equilibria and Pareto optimality, J. Econ. Theory 18, 1978, 368-370) demonstrated that the Second Welfare Theorem generally fails to hold in economies in which benevolent agents are permitted to make gifts. In this brief note, we point out that for the class of economies considered by Goldman, symmetry and a slight bias in favor of one's own consumption restore the Second Welfare Theorem.