Class Notes test 2 - -Dominant Eliminate infeasible Eliminate dominated Choice set choosing among them non thats purely better than another The amount

Class Notes test 2 - -Dominant Eliminate infeasible...

This preview shows page 1 - 3 out of 19 pages.

9/26/12-Dominant Eliminate infeasible Eliminate dominated Choice set- choosing among them, non that’s purely better than another The amount of money I am willing to pay is the compensating differential Indifference curves-family of non crossing curves each a little further from the origin than the one before Point of tangency between the two points gives you the best choice. Criterin-alternative matrix- useful for identifying dominated options Pareto principle- always make pareto improvements when you can Pareto improvement a movement from a inferior point to a higher Pareto criterion-make one person better off without making another worse off Point part of the pareto optimum set if and only if you cant make someone better off without making someone worse off Once your at the pareto optimum theres nothing left but conflict Once your at the efficient set there are only tradeoffs Optimal points- they are not dominated, therefore we have nothing left but tradeoffs If there is a change in resources, or something comes up with a new option, you might find a feasible point and push the frontier outward Benefit cost anaylsis-add up tradeoffs? –policy version of moral algebra Why my someone not like a pareto improvement? 2 four year old children, you have two cookies- imagine they give you another cookie are you better off? By the pareto principle I just made you better off, you can have … reason pareto principle isn’t right: people care about more than their material rewards care about being treated fairly care about how their being treated compared to someone else economists say that’s irrational wealth: making 10% more than your brother in law, you want more even if its equal pareto ignores Darwinian principles every point on the plane divides the plane into four quadrants giving up bargaining position. If your in a negotiation something that everyone wanted didn’t pass because it would have made the future negotiation harder pareto principle is obvious—of course its true its just common sense, on the other hand it includes the dynamics of negotiation and human nature. Principle is not forgotten but you won’t act on it everytime. 10/1/12 Pareto Improvement-Better for someone worse for no one. The well being of the people you can use the same technique, cross out the infeasabile options, dominated options (in this case it’s an option that makes someone better off and no one worse off) The pareto principle is the principle of dominance where most of agree that its common sense
Image of page 1
Put moral algebra on steroids- what if we can extend the principle of compensating differentials. Trade off across dimensions-use compensating differential How much should we sacrifice. Pareto principle-better for everyone its better As a policy rule it would be a unanimity rule Pareto criterion-if a pareto principle is available, do it.
Image of page 2
Image of page 3

You've reached the end of your free preview.

Want to read all 19 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors