No Production Q10. There are two goods and no production is possible. Persons 1,

Question

No Production

Q10. There are two goods and no production is possible. Persons 1,2 and 3 all have the exact same preferences for the goods, represented by the utility function ui(xi,r2i) - rir2i. Person 1 owns the bundle (12,4), Person 2 owns the bundle (4,4), and Person 3 owns the bundle (4,12) Determine whether each of the following allocations is in the core, and show why your answer is the right one. (a) (zi1,221) = (8,8), (zi2Am) = (4,4), (zi3,Z23)= (8,8) (b) (rii,T2)= (4,8), (zi2,22)= (4,4), (zi3,T23)= (7,7)

Explanation / Answer

Since there is no production taking place, the amount of bundles before and after allocation will remain the same.

The total amount of 1 good = 12+4+4 = 20 and the second good is 4+4+12 = 20

(a) Herein the allocation is such that the amount of total bundle before and after allocation is exactly the same, ie 20 units of both the goods.

(b) In this case, the amount of good 1 = 4+4+7 = 15 and second good = 8+4+7 = 19

Thus, this allocation will lie in the core as in this case allocation before and after is not the same but in declining

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.