Re: General Equilibrium Question

Posted by Amit Goyal on May 16, 2013; 1:27am
URL: http://discussion-forum.276.s1.nabble.com/General-Equilibrium-Question-tp7580742p7580778.html

(a) Find the set of feasible allocations.
Set of feasible allocations (locations to place the nuclear power plant) is [0, 1], i.e. all locations from 0 to 1 (including 0 and 1).

(b) Find the set of Pareto optimal allocations.
The set of Pareto optimal allocations (locations to place the nuclear power plant) is {0, 1} U (0.4, 0.5), i.e. all locations between 0.4 and 0.5 (not including 0.4 and 0.5) and locations at the extreme 0 and 1.

(c) Find the set of utilitarian allocations.
Utilitarian allocation/location is one that maximizes the sum of utilities (distances) of the two individuals. In this case, it is location 1.

(d) Find the Rawlsian allocation.
Rawlsian allocation/location is one that maximizes the utility (distance) of the worst of the two individuals. In this case, it is location 0.475.