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Constrained Pareto efficiency is a weakening of Pareto optimality, accounting for the fact that a potential planner (e.g., the government) may not be able to improve upon a decentralized market outcome, even if that outcome is inefficient. This will occur if it is limited by the same informational or institutional constraints as are individual ...
Pareto front. In multi-objective optimization, the Pareto front (also called Pareto frontier or Pareto curve) is the set of all Pareto efficient solutions. [1] The concept is widely used in engineering. [2]: 111–148 It allows the designer to restrict attention to the set of efficient choices, and to make tradeoffs within this set, rather than ...
Fundamental theorems of welfare economics. There are two fundamental theorems of welfare economics. The first states that in economic equilibrium, a set of complete markets, with complete information, and in perfect competition, will be Pareto optimal (in the sense that no further exchange would make one person better off without making another ...
Multi-objective optimization or Pareto optimization (also known as multi-objective programming, vector optimization, multicriteria optimization, or multiattribute optimization) is an area of multiple-criteria decision making that is concerned with mathematical optimization problems involving more than one objective function to be optimized simultaneously.
Kaldor–Hicks efficiency. A Kaldor–Hicks improvement, named for Nicholas Kaldor and John Hicks, is an economic re-allocation of resources among people that captures some of the intuitive appeal of a Pareto improvement, but has less stringent criteria and is hence applicable to more circumstances. A re-allocation is a Kaldor–Hicks ...
Allocative efficiency is the main tool of welfare analysis to measure the impact of markets and public policy upon society and subgroups being made better or worse off. It is possible to have Pareto efficiency without allocative efficiency: in such a situation, it is impossible to reallocate resources in such a way that someone gains and no one ...
Pareto optimality (collective efficiency): whenever all individuals of a society strictly prefer an outcome x over an outcome y, the choice function doesn't pick y. Formally, a social choice function F is Pareto optimal if whenever p ∊ Rel(X) N is a configuration of preference relations and there are two outcomes x and y such that x ⪲ i y ...
t. e. In welfare economics and social choice theory, a social welfare function —also called a social ordering, ranking, utility, or choice function —is a function that ranks a set of social states by their desirability. A social welfare function may yield several possible outcomes; each person's preferences are combined in some way to ...