Unformatted text preview: ΔF A = +1 ΔC A = -3 This trade will leave Andrew as well off because he is giving up 3 units (the maximum he was willing to). ΔF B = -1 ΔC B = +3 Becky, on the other hand, is getting more than what she was asking for (she asked for a minimum of 2 and she is getting 3) Therefore, in this trade Becky is better off and Andrew is as well off as before. So, the after trade is a Pareto preferred allocation. The trades that will leave both agents better off are the following: ΔF A = +1 -3 < ΔC A < -2 ΔF B = -1 +2 < ΔC B <+ 3 Note the strictly greater and strictly less than signs. What this is saying is that any trade in which Andrew gives up anything in between 2 and 3 units of clothing (ie: anything more than 2 but less than 3) to Becky, will make both of them better off....
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This note was uploaded on 01/27/2011 for the course ARE 176 taught by Professor Farzin during the Fall '08 term at UC Davis.
- Fall '08