Definitions Flashcards
0
Q
Define Prisoners Dilemma
A
Two individuals acting in their own best interest pursue a course of action that does not result in the ideal outcome. Both protect themselves at the expense of the other. Worse state than if they had cooperated
1
Q
Define Pareto efficiency
A
Resources are allocated in most efficient manner so one party’s situation can not be improved without making another party’s situation worse. Does not imply inequality or fairness
2
Q
Define producer surplus
A
An Econ measure of difference between amount a producer of a good recovers and min they would have accepted
3
Q
Moral hazard
A
Risk a party to a transaction might take risks against a contract to benefit for themselves
