Re: Isi 2008.. Contract curve

Posted by phelps.phan on May 08, 2014; 5:29pm
URL: http://discussion-forum.276.s1.nabble.com/Isi-2008-Contract-curve-tp7589040p7589048.html

See utility of A is Xa. He does not care about Y that he has. We can assume it to be a neutral good. So his consumption will always be in the border of the edgeworth box (eqn. Ya=0). And B has concave utility. He'll spend his entire income in either of the good. So for equilibrium to be in place he will be consuming entire Y. So Yb cannot be 0. Thats my reasoning. I'm not sure though.