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DSE 2016 doubt
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Halflife
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Jun 18, 2017; 2:55pm
DSE 2016 doubt
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Abhitesh
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Jun 18, 2017; 3:24pm
Re: DSE 2016 doubt
Answer seems to be B.
First find the set of pareto-optimal(PO) allocations.
Then take any value of px with py=1 and solve optimization prob. for both agents.
Check if your optimal soln. clears market. If yes then prices are competitive.
Halflife
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Jun 18, 2017; 3:28pm
Re: DSE 2016 doubt
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Abhitesh
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Jun 18, 2017; 3:46pm
Re: DSE 2016 doubt
Take it M1 and M2. If p<1 then (x2=6 and y2=0) and (x1 = M1/p+1 =y1) will be optimal which doesn't clears market.
Rajesh
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Jun 19, 2017; 2:25am
Re: DSE 2016 doubt
According to this logic, then if, say M2= Rs. 10,then:
If p<1, x2=5 (we can't assume his income to be sufficient to buy 6 units wholly)
and so (x1,y1)= (1,1)(still again depend on income of M1)
so, shouln't it be option d in that case?
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