Questions tagged [pareto-efficiency]
The pareto-efficiency tag has no usage guidance.
0
votes
0answers
11 views
Terminology for allocation of marginal inputs
Suppose there are four modalities 1, 2, 3, and 4, for moving goods between two particular destinations, with associated capacity $\mathscr{C}_i$ and cost $c_i$ for $i\in \{1,2,3,4\}$ and also that $...
0
votes
1answer
76 views
Pareto set and Edgeworth box
General equilibrium framework; two individuals, two goods represented in an Edgeworth box.
Is it true that if the preference are both strongly monotonic the Pareto set will go from the origin of an ...
-1
votes
0answers
25 views
Pareto Efficient Envy Free Allocation
For an exchange economy
$u_1=x_1y_1$
$u_2=2x_2y_2$
$e_1=(1,0)$ and $e_2=(0,1)$.
Find an Allocation which is both Pareto Optimal and Fair:
I found the Pareto Optimal allocations (on equating $MRS$) ...
1
vote
2answers
35 views
Pareto Optimality of Endowments
Consider a $2*2$ exchange economy where individual $1$ has an endowment $(4,5)$ and individual 2 has an endowment $(6,5)$.
The utility functions of individuals are represented by $U({x}_i{y}_i)$=${x}...
3
votes
1answer
36 views
Blocking Coalitions
For $n$ individuals, can a blocking coalition only be formed by at least $n/2$ individuals? For example, if there are 6 individuals, can less than 3 individuals form blocking coalitions?
0
votes
1answer
72 views
Why is Pareto efficiency not always equitable or equilibrium?
Just for information. I think we can agree on that a Pareto optimal allocation is where you cannot put someone in a better position without making someone else worse off. I know that any competitive ...
1
vote
1answer
25 views
How does elasticity impact market efficiency?
I am wondering how the price elasticity of demand (or supply) impacts market efficiency. A more specific question - can we say that in a monopolized market elasticity will be low, and that in a ...
0
votes
1answer
31 views
Are slacks the same as mix-inefficiency?
On the diagram below it is stated that A' has input slacks as it could reduce the amount of $x_2$ and still be on the frontier (by moving to C). However I recall mix-inefficiency having a similar ...
0
votes
0answers
25 views
What is the rational behind the “best set of weights” under DEA?
I'm trying to learn the Charnes, Cooper, Rhodes (CCR) model for data envelopment analysis (DEA) and a key idea presented is the notion of a "best set of weights".
Whereby you are trying to find the ...
2
votes
2answers
135 views
Inclusion of firms on the efficient frontier of a Production Possibility Set
I'm working through Cooper's Data Envelopment Analysis, and they are going over Production Possibility Sets.
They present 9 firms, each with two inputs and one output:
Graphically it easy to see why ...
2
votes
2answers
303 views
How to calculate Pareto Optimal outcome in a game with a Nash Equilibrium
I have at hand a two period game.
In period 1, Union decides wage offer $w$.
In period 2, firm decides on L, given wage.
Union maximizes $wL$
Firm maximizes $=(L(100-L) - wL) \quad if \quad L&...
0
votes
0answers
18 views
If US capital income taxation were eliminated, which ordinary income tax brackets would be equally progressive?
This question only considers federal taxes in the United States. Also, by "capital income" I am including dividends, interest, capital gains, corporate incomes and estates.
The Chamley-Judd result ...
0
votes
0answers
48 views
Do I understand the second welfare theorem correctly?
As far as I understand, the second welfare theorem says that all Pareto-optimal allocations can be reached by market equilibrium on free competitive markets.
Yet it seems that this understanding is ...
2
votes
1answer
466 views
Are there any real world examples of potential Pareto improvements?
Professor George Fallis in his book "Housing Economics" writes when discussing the notion of a Pareto improvement
(Page 123)
In the real world, almost all policies recommended by economists are ...
1
vote
1answer
137 views
Pareto efficient adverse selection
Please look at the following. Question which I posted.
I did not understand the answer for the part b - Pareto efficient.
I am happy if you explain it in more details. Thank you.
Also please ...
0
votes
0answers
258 views
Is a Walrasian equilibrium necessarily Pareto efficient?
Is it correct to say that in a double auction the Walrasian equilibrium Pareto efficient?
0
votes
1answer
143 views
The social welfare of a unique general competitive equilibrium in an exchange economy
The first theorem of welfare economics states that "Every Walrasian Equilibrium (WE) is Pareto Efficient (PE)" - Microeconomic Theory Nicholson, Synder 11th ed. p477. But PE is quite a weak condition. ...
3
votes
1answer
123 views
Bertrand-equilibrium with discrete price set
Consider a market for a homogenous product with three producers, firms A, B and
C. The firms have constant marginal costs which are equal to $c = 20$ for each firm. Consumers always buy from the firrm ...
1
vote
1answer
427 views
Is the convexity of production sets necessary for the welfare theorems?
I have read that the convexity of production sets (for instance non-increasing returns to scale) is not a necessary assumption for the first welfare theorem but it is for the second welfare theorem. ...
6
votes
2answers
84 views
Does every allocation have a maximal Pareto-improvement?
Consider an economy with a finite number of goods and a finite quantity of each good. Each agent $i$ has a preference-relation $\succeq_i$ which is a total, reflexive and transitive relation over the ...
0
votes
1answer
83 views
A question regarding definition of Pareto efficiency
It says on Wikipedia: "All the points on this locus are Pareto efficient allocations, meaning that from any one of these points there is no reallocation that could make one of the people more ...
1
vote
1answer
113 views
Find Pareto-optima two good economy
There's an exercise I cannot wrap my head on. I actually have the solution to the problem, but still I don't quite understand it.
Let an economy be composed of two consumers $A$ and $B$ and two goods ...
1
vote
1answer
70 views
Can one prove Pareto efficiency in an n-party system by showing all Pareto improvements between any two given parties are made?
I've made a proof of Pareto efficiency of a funding system that I've developed. There are effectively four types of actors. I've shown all Pareto improvements are made between any two given parties ...
1
vote
0answers
245 views
Exercise about social planner's optimal allocation of resources
a. There are 2 cities C1 and C2. Everyone in both the cities has same concave, increasing utility function. There's only 1 good, with the social planner. How should s/he allocate it?
b. Now ...
1
vote
0answers
14 views
Is there a term for economic policy design built from minimizing per-household adverse impact?
May be easiest to start with an example: let's say I'm looking to eliminate the mortgage interest deduction, but want to minimize the impact on households from doing so. I also want the change to be ...
0
votes
1answer
68 views
How does a Pareto efficient equilibrium scale for n individuals?
Say I have a starting situation with Pareto efficient allocations between 2 individuals, now a third one comes in and changes the allocations. Now a fourth one, etc. Up untill a nth individual comes ...
0
votes
0answers
61 views
Altruistic Preferences (bequest motive) in Overlapping Generations Model
Does bequest motive cause dynamic inefficiency or not in OLG?
-4
votes
1answer
221 views
$U=xy$ for all people in a small island, What are the pareto efficient allocations? [closed]
On a certain island there are only two goods, wheat and milk.The only
scarce resource is land. There are 1,000 acres of land. An acre of
land will produce either 16 units of milk or 37 units of ...
0
votes
1answer
445 views
Pareto Optimality and Core
I know this is a basic question. Can I get a mathematical proof for "Any allocation in the core of an economy is also Pareto optimal." I found this statement on some PPT online.
1
vote
2answers
908 views
How do we find pareto optimal points in a 2 goods simple exhange economy? [closed]
Suppose there are 2 individuals in a simple exchange economy with utilities $U_{1}= ax_{1} + x_{2}$ and $U_{2}= y_{1}y_{2}$.
Endowments are $(x_{1},x_{2})=(4,0)$ and $(y_{1},y_{2})=(1,5)$.
We are ...
4
votes
1answer
88 views
Have there been any attempts to turn free-trade agreements into Pareto improvements?
The textbook economic case for free trade agreements is that they constitute a Kaldor-Hicks improvement, which that in any given country the winners win more than the losers lose, when the benefits ...
0
votes
1answer
1k views
Pareto optimal and Walrasian equilibrium [closed]
There are 100 units of good 1 and good 2 in a economy. Consumer 1 and consumer 2 have 50 units of each good.
Consumer 1 only wants good 1 whereas consumer 2 only wants good 2.
Note: Neither of these ...
1
vote
1answer
125 views
Understanding Pareto Optimal
I am looking at an exchange economy where I have two types of goods and n consumers. Half of the consumers have a utility function given by $U(x)= 5\ln{x} +m $ and the other half of the consumers have ...
6
votes
2answers
2k views
Pareto optimality with externalities
I'm reading the book "Economics of natural ressources and the environment" written by D. Pearce and R. Turner. They explain that the competitive equilibrium is not a Pareto optimum in case of (...
1
vote
0answers
257 views
Pareto optimality with Lagrange
I understand that you find the interior solutions for the pareto efficient set with Lagrange (Maximizing the utility with the endowment constraints and holding the other player's utility fixed)
How do ...
1
vote
1answer
198 views
Finding the Pareto optimal set with preferences for 3 individuals
Question: Let $N=\{1,2,3\}$ be a set of three people and $X=\{a,b,c,d\}$ a set of 4 political parties. The individuals have the following preferences:
Individual 1: $a \succ_1 b \sim_1 c \succ_1 d$
...
3
votes
1answer
488 views
Why do externalities lead to a Pareto-inefficient outcome?
So we know that under a Pareto-inefficient outcome, there is room for Pareto improvement, i.e. making someone better off without hurting anyone.
Assume that there is a drug company which is in ...
3
votes
1answer
628 views
equilibrium, optimum, and decentralizing the optimum
I'm reading a paper on parking:
Anderson & de Palma, 2003, The economics of pricing parking.
The authors repeatedly refer to either 'decentralizing the optimum' or 'the optimum can be ...
1
vote
0answers
192 views
About Lindahl equilibrium and Pareto Optimality
Let an economy with 20 consumers, one private good $x_2$ and one public good $x_1$. The public good is produced using the private good as input with the following technology $x_1=g(z)=z^{1/2}$, where $...
6
votes
3answers
295 views
Is the Convex Combination of Two Pareto Optimal Allocations Also Pareto Optimal?
I am studying for my qualifiers, and I ran into this question from a previous year's exam.
$\textbf{Question:}$
Consider a two-consumer two-good pure exchange economy. Both preferences are locally ...
3
votes
0answers
795 views
Sen's Liberal Paradox
Economist and philosopher Amartya Sen posited that no social system could guarantee:
A minimal sense of freedom in social choice
Pareto efficiency
His original article can be found here.
In his ...
2
votes
1answer
2k views
Market equilibrium and pareto efficiency
How can I prove that the equilibrum point $D(p)=S(p)$ is pareto efficient?
The definition of pareto efficient: there is no way to make any person better off without hurting anybody else
$D(p)$ is ...
2
votes
1answer
199 views
Productive Allocative Efficiency (Competitive Equilibrium)
I am doing an Intermediate Microeconomics class... in a 2*2*2*2 economy, I know that MRS (marginal rate of substitution) is supposed to be equal to MRTS (marginal rate of technical substitution) in ...
2
votes
1answer
219 views
Finding Pareto Optimality
Consider an exchange economy with two individuals and 2 commodities. The endowments of the commodities are 1 each. Which one of the following are Pareto Optimum.
a. {$\frac{1}{2},\frac{1}{2},(\frac{1}...
0
votes
0answers
183 views
In a exchange economy with linear utility function, will prices always remain the same?
In an exchange economy, with two unchanging utilities (for the two consumers) one of which is linear, will the prices remain fixed across all Pareto optimal allocations?
4
votes
1answer
4k views
How to find corner Pareto efficient allocations
I have some troubles in understanding how to find Pareto efficient allocation that are on the frontier of the Edgeworth box. I mean, the interior ones, can be found using the equality $MRS_A = MRS_B$, ...
2
votes
1answer
63 views
Is a lack of any barriers to entry a necessary condition for ensuring pareto optimality is reached?
I understand that a competitive market is necessary for a market to equilibriate to a pareto optimal state, and that things like economies of scale, network effects, government restrictions, and ...
0
votes
0answers
239 views
How does Joseph Stiglitz and Greenwald explain why markets with imperfect information fail to have a pareto efficient equilibrium?
How does Joseph Stiglitz and Greenwald explain why markets with imperfect information fail to have a pareto efficient equilibrium? What premises do they use to come to that conclusion?
For example, ...
0
votes
2answers
117 views
In modern economics, what are the least restrictive conditions shown to theoretically achieve Pareto Efficiency?
In researching this question, I've come across plenty of sources that regurgitate intro econ textbooks that say markets equilibrate to Pareto efficiency in conditions of perfect competition (where ...
8
votes
3answers
1k views
Quasilinear Utility: Pareto Optimality Implies Total Utility Maximization?
I read that if we have quasilinear utility for all consumers, then any pareto optimal allocation maximizes the sum of utility levels of all consumers. That is:
$\textbf{What we know:}$
$$1)\quad u^i(...
