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In the case of two goods and two individuals, the contract curve can be found as follows. Here refers to the final amount of good 2 allocated to person 1, etc., and refer to the final levels of utility experienced by person 1 and person 2 respectively, refers to the level of utility that person 2 would receive from the initial allocation without trading at all, and and refer to the fixed total ...
The idea of the core already appeared in the writings of Edgeworth (1881), at the time referred to as the contract curve. [1] Even though von Neumann and Morgenstern considered it an interesting concept, they only worked with zero-sum games where the core is always empty. The modern definition of the core is due to Gillies. [2]
Calculation of Point of Total assumption (the case when EAC exceeds PTA that should be treated as a risk trigger, is shown) The point of total assumption (PTA) is a point on the cost line of the profit-cost curve determined by the contract elements associated with a fixed price plus incentive-Firm Target (FPI) contract above which the seller effectively bears all the costs of a cost overrun.
However, based on the extent of society’s preferences for an equal distribution of real income, a point off the curve may be preferred. All points on or below the utility–possibility frontier are attainable by society; all points above it are not attainable. The utility–possibility frontier is derived from the contract curve. [1]
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
The entire Pareto set is sometimes called the contract curve, while Mas-Colell et al. restrict the definition of the contract curve to only those points on the Pareto set which make both Abby and Octavio at least as well off as they are at their initial endowment.
The production-possibility frontier can be constructed from the contract curve in an Edgeworth production box diagram of factor intensity. [12] The example used above (which demonstrates increasing opportunity costs, with a curve concave to the origin) is the most common form of PPF. [13]
A Robinson Crusoe economy is a simple framework used to study some fundamental issues in economics. [1] It assumes an economy with one consumer, one producer and two goods. The title "Robinson Crusoe" is a reference to the 1719 novel of the same name authored by Daniel Defo