Contract curve

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Blue contract curve showing tangential intersections of indifference curves on an Edgeworth box

Given some endowment in an Edgeworth box, the contract curve is the individually rational subset of the Pareto set. In other words, it is the set of Pareto efficient allocations in an economy. Also, any Walrasian equilibrium lies in the contract curve of the Pareto set.

On the contract curve, the marginal rate of substitution is the same for both agents.

See welfare economics and list of economics topics.

[edit] References

Mas-Colell, Andreu; Whinston, Michael D.; & Green, Jerry (1995). Microeconomic Theory. New York: Oxford University Press. ISBN 0-19-510268-1

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