Approximate Quasi-linearity for Large Incomes

Abstract

Quasi-linear utility functions are widely used in economics and game theory as convenient tools. Quasi-linearity ignores income effects on individual evaluations of alternative choices; indeed, it is captured by a condition of no-income effects on such evaluations. However, income effects are non-negligible relative to agents’ economic activities in many social/economic problems such as in housing markets. In this chapter, we consider how quasi-linearity holds for large incomes for agents. We employ an axiomatic approach to this problem and study its implications and applications to some economic and game theoretic problems.