Questions tagged [pareto-efficiency]

An efficiency standard based on the idea that the most efficient outcomes are those where no individual can be made better-off without making at least one other worse-off.

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Corner Solutions for Pareto Efficiency

I have been reviewing calculations to find walrasian equilibrium and pareto efficient allocations. Assume we are in an environment with two consumers, $A$ and $B$, and two goods, $x$ and $y$. From ...
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Calculating price in a pure exchange economy

The problem is simple, I'm not really sure of my answer though. Consider an economy where there are two consumers and two goods: $$U_1(x_{11}, x_{21}) = x_{11}$$ $$U_2(x_{12}, x_{22}) = x_{22}$$ $...
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An economy with no Pareto-efficient envy-free allocations

In a famous paper from 1974, Hal Varian proved (in Theorem 2.3) that: In an economy with homogeneous divisible googs, if all agents have monotonic and convex preferences, then there exists an ...
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How can an outcome be Pareto efficient but not Kaldor-Hicks efficient?

An policy is a Pareto improvement if it makes some people better off and no one worse off. And a policy is a Kaldor-Hicks improvement if it can be turned into a Pareto improvement by redistributing ...
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Pareto Efficiency Outcomes in Games

I have started studying the Pareto efficiency notion in Game theory. The definition I am familiar with is this: Strategy profile $\mathbf{s}$ Pareto dominates strategy $\mathbf{s}'$ if for all $i\in\...
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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 ...
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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 ...
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367 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 ...
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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 $...
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Kaldor-Hicks optimum allocation with externality

Suppose there are two individuals. Level of good h can be determined only by individual 1 and it has a positive externality on individual 2. To find Pareto efficient allocation, we add the utilities ...
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A problem: allocation of apartments

Setup: Trine owns an apartment in Copenhagen. She is willing to rent it out at any positive price. Peter and Simon lives together and are both students. They will like to rent the apartment for less ...
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179 views

robinson economy with production

Facing a little bit of a problem with this questions, did a similar one BUT the utility function was not linear and got MRS dependent on goods (was not just a number) - here I am at a loss. The ...
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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 ...
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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 ...
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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, ...
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Computing the competitive equilibrium given initial allocation

Suppose that there are two agents, 1 and 2, and two goods, honey (h) and lemon (l), and that the agents' preferences over these goods are defined by the following utility functions: $$u^1(x_h^1, x_l^...