If there are many equilibrium allocations, the agents will
A) remain at the no-trade allocation
B) both voluntarily agree to trade to that allocation
C) agree on one of these allocations through a process of bargaining

Question

Quizplus · Accepted Answer

If there are multiple equilibrium allocations, there is no clear incentive for both agents to agree to trade to any particular allocation. In this case, the agents are likely to engage in a process of bargaining to try to come to an agreement on which allocation to choose. Therefore, the most likely outcome is that the agents will agree on one of the multiple equilibrium allocations through a process of bargaining.

If There Are Many Equilibrium Allocations, the Agents Will