There is no consensus on how to measure social welfare and inequality when households have different needs. As we show, a dilemma emerges between holding households responsible for their needs or compensating them. This dilemma is of first-order importance for social welfare, but generally plays...

We study equitable allocation of indivisible goods and money among agents with other-regarding preferences. First, we argue that Foley's (1967) equity test, i.e., the requirement that no agent prefer the allocation obtained by swapping her consumption with another agent, is suitable for our...