If the endowment allocation in an Edgeworth Box is efficient, then this allocation is also the competitive equilibrium allocation.

Question

Quizplus · Accepted Answer

In an Edgeworth Box, the endowment allocation represents the initial distribution of resources among individuals. An efficient allocation means that no further gains can be made by reallocating resources between individuals without making someone worse off. In a competitive equilibrium, the allocation of resources must also be efficient as any further gains from trade would have been already exploited by market forces. Hence, an efficient allocation in an Edgeworth Box is also the competitive equilibrium allocation.

If the Endowment Allocation in an Edgeworth Box Is Efficient