Here I want to find Pareto efficient payoff set.
The answer is (C,β), (B, β), (C, δ)
But I don’t understand why? Please explain clearly this answer. Thanks a lot
Economics Stack Exchange is a question and answer site for those who study, teach, research and apply economics and econometrics. It only takes a minute to sign up.Sign up to join this community
A payoff pair $(x,y)$ is Pareto efficient if it is not Pareto dominated. This means that there does not exist another payoff pair $(x', y')$ such that $x < x'$ and $y < y'$. (Depending on the exact definition, sometimes of of the two inequalities can be weak).
All payoffs in the payoff matrix except for $(C,\beta), (B, \beta)$ and $(C, \delta)$ are dominated by $(C, \beta) = (13, 13)$, so they are not Pareto efficient.