# 14-144/II (2014-10-30)

Harold Houba, VU University Amsterdam, the Netherlands; Roland Iwan Luttens, Amsterdam University College, the Netherlands; Hans-Peter Weikard, Wageningen University, the Netherlands
power, coercion, jungle economy, farsightedness, withholding
JEL codes:
D51, D61, P52

We include initial holdings in the jungle economy of Piccione and Rubinstein (Economic Journal, 2007) in which the unique equilibrium satisfies lexicographic welfare maximization. When we relax assumptions on consumption sets and preferences slightly, equilibria other than lexicographic welfare maximizers can be jungle equilibria. This result is due to myopia. We introduce the concept of farsightedness and show that farsighted jungle equilibria coincide with lexicographic welfare maximization. However, we also find farsighted equilibria that are Pareto inefficient since stronger agents may withhold goods from weaker agents. Here, gift giving by stronger agents is needed to achieve Pareto efficiency. We argue that even trade has a role in the jungle. Our results add to understanding coercion and the subtle role of gift giving and trade in an economy purely based on po wer relations.