ECON-2110 Lecture Notes - Lecture 3: Bargaining Problem, Angus Deaton, Money Supply
30 Aug 2016
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Mc = mb maximizes total net benefit. Monetary cost of going to jail: lost wages, inability to get job after work, limited contact with loved ones. Ask them how much they would honestly pay to not go to jail. Milton freedman there is no such thing as a free lunch! if there was a free lunch someone would"ve already taken advantage of it: power of trade. Steve values his iphone at , bill wants the iphone but values it at they are able to trade. There is an opportunity for trade that generates wealth. Trade takes resources from low value users and puts it in the hands of high value users. Trade is voluntary making it mutually beneficial. John nash nash bargaining solution able to predict how much better off both parties would be after trading. Trade is always beneficial if you"re the one participating in it.
