dse entrance 2012 question doubt

Posted by kam on Mar 18, 2013; 6:01pm
URL: http://discussion-forum.276.s1.nabble.com/dse-entrance-2012-question-doubt-tp7579873.html

this refers to question no 27, we have utility functions U^a=x+y and U^b=x^2 + y^2 and endowments are A(2,1) and B(1,2), two allocations are given, allocation 1-A(1.5,0) and B(1.5,3) and allocation 2-A(1.5,1.5) and B(1.5,1.5). The answer key says that allocation 1 is pareto optimal, but how can this be since A's utility is decreasing