Microeconomics

We consider an exchange economy and i have to show in an edgeworth box that an allocation can be individually rational (meaning that no consumer prefers the initial bundle to the bundle obtained in the allocation) and pareto optimal without being a walras equilibrium allocation... can someone help me with that?

Whew. The level of your question stretches the level of help I can provided. (I havent seen this type of question since graduate school, which for me was many many years ago.)

That said, I believe the answer you seek will be a corner (edge) solution in the Edgeworth box. With an edge solution, a) you get the benefits of both parties being better off relative to an initial allocation, b) a pareto optimal solution in that you cant do any better, and c) a non-walras equilibrium allocation in that the two indifference curves are not touching AND tangent. You can get an edge solution by having one of the players get zero or practically zero utility from one of the goods.

I found a really cool Aplet on the internet that displays an Edgeworth box under alternative initial allocations and utility functions.

Goto sscnet.ucla.edu/ssc/labs/cameron/e1f98/imapedge (dot) html

I was thinking more in the way of perfect komplements??... is that wrong?


Perfect complements. Very interesting!
If both parties treat the two goods as perfect complements, then it does not work as there are no gains from trade. However, if both parties treat the two goods as nearly perfect complements and Person 1 slightly perfers x over y and Person 2 slightly perfers y over x, then YES that could work. But it works for the same reason I outlined before; it leads to an edge solution in your edgeworth box.

With nearly perfect complements, what must the indifference curve look like? It must be a downward sloping nearly straight line. If the other person also has a nearly straight indifference curve, then the two indifference curves will never be tangent within the box. However, if one of the parties has a normal looking indifference curve, then an interior tangent point will likely be found. This, I believe, implies a Walras equilibrium condition.

Economyst, would you like to help me some other problems in microeconomics???.... I have a big assignment to hand in on monday (european time...) and i could use some help from someone like you.... im a norwegian student and we are taught this course in english and i would really appreciate some help from you with some other questions. Would you consider giving me your emailadr so i can send you my guestions ( i could type them in here also if you prefer...)???? i would be soo happy and greatful. Thank you, Ansi

Ansi:
you must realize that I, along with the other homework helpers on this site, are volunteers. I try to answer questions as my own time permits. (e.g., I rarely visit the site on weekends.) But, I make no promises.

Second, reread the my first line in response to your original question.

So, ask your questions, but be sure to do a little research first. (We try not do the homework for students). If my time permits, and I think I know the answer or I can provide insights, I will try to answer.

Also, as I advanced in economics, I found that forming a study group with other students in the class was immensely helpful.

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