DSE 2011 Q.46

Posted by L on May 31, 2015; 5:17pm
URL: http://discussion-forum.276.s1.nabble.com/DSE-2011-Q-46-tp7597280.html

Hi guys



I want to confirm that what will be pareto efficient allocations if b (beta) > a (alpha).
What I have got is for the market of X to clear, price of X should be zero (which is the answer for the question). So, in that case agent 2 cannot buy anything and agent 1 will buy a units from 1, and maximizing his utility. So, pareto efficient allocation can be
Agent 1 : (a, a)
Agent 2: (b-a, 0)
Other pareto efficient allocations can be with more than a units of x with agent 1 and correspondingly less with 2 which won't change the utility.
Is this correct?