In economics, an Edgeworth box, named after Francis Ysidro Edgeworth, is a way of representing various distributions of resources. Edgeworth made his presentation in his book Mathematical Psychics: An Essay on the Application of Mathematics to the Moral Sciences, 1881. Edgeworth's original two-axis depiction was developed into the now familiar box diagram by Pareto in his book "Manual of Political Economy",1906 and was popularized in a later exposition by Bowley. The modern version of the diagram is commonly referred to as the Edgeworth–Bowley box.
The Edgeworth box is used frequently in general equilibrium theory. It can aid in representing the competitive equilibrium of a simple system or a range of such outcomes that satisfy economic efficiency. It can also show the difficulty of moving to an efficient outcome in the presence of bilateral monopoly. In the latter case, it serves as a precursor to the bargaining problem of game theory that allows a unique numerical solution.
Read more about Edgeworth Box: Example, Pareto Set
Famous quotes containing the word box:
“[Let] the Union of the States be cherished and perpetuated. Let the open enemy to it be regarded as a Pandora with her box opened; and the disguised one, as the Serpent creeping with his deadly wiles into paradise.”
—James Madison (1751–1836)