Saturday, November 10, 2007

Pareto Optimal

Pareto optimal: no other allocation can make one better off without making the other worse off.
Given a set of alternative allocations of, say, goods or income for a set of individuals, a movement from one allocation to another that can make at least one individual better off without making any other individual worse off is called a Pareto improvement. An allocation is Pareto efficient or Pareto optimal when no further Pareto improvements can be made.

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