Pareto efficiencyPareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engineer and economist, who used the concept in his studies of economic efficiency and income distribution. The following three concepts are closely related: Given an initial situation, a Pareto improvement is a new situation where some agents will gain, and no agents will lose.
Production–possibility frontierIn microeconomics, a production–possibility frontier (PPF), production possibility curve (PPC), or production possibility boundary (PPB) is a graphical representation showing all the possible options of output for two goods that can be produced using all factors of production, where the given resources are fully and efficiently utilized per unit time. A PPF illustrates several economic concepts, such as allocative efficiency, economies of scale, opportunity cost (or marginal rate of transformation), productive efficiency, and scarcity of resources (the fundamental economic problem that all societies face).
Noetherian schemeIn algebraic geometry, a noetherian scheme is a scheme that admits a finite covering by open affine subsets , noetherian rings. More generally, a scheme is locally noetherian if it is covered by spectra of noetherian rings. Thus, a scheme is noetherian if and only if it is locally noetherian and quasi-compact. As with noetherian rings, the concept is named after Emmy Noether. It can be shown that, in a locally noetherian scheme, if is an open affine subset, then A is a noetherian ring.
Algorithmic mechanism designAlgorithmic mechanism design (AMD) lies at the intersection of economic game theory, optimization, and computer science. The prototypical problem in mechanism design is to design a system for multiple self-interested participants, such that the participants' self-interested actions at equilibrium lead to good system performance. Typical objectives studied include revenue maximization and social welfare maximization. Algorithmic mechanism design differs from classical economic mechanism design in several respects.
Game theoryGame theory is the study of mathematical models of strategic interactions among rational agents. It has applications in all fields of social science, as well as in logic, systems science and computer science. The concepts of game theory are used extensively in economics as well. The traditional methods of game theory addressed two-person zero-sum games, in which each participant's gains or losses are exactly balanced by the losses and gains of other participants.
Contract theoryFrom a legal point of view, a contract is an institutional arrangement for the way in which resources flow, which defines the various relationships between the parties to a transaction or limits the rights and obligations of the parties. From an economic perspective, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of information asymmetry. Because of its connections with both agency and incentives, contract theory is often categorized within a field known as law and economics.
UtilityAs a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophers such as Jeremy Bentham and John Stuart Mill. The term has been adapted and reapplied within neoclassical economics, which dominates modern economic theory, as a utility function that represents a consumer's ordinal preferences over a choice set, but is not necessarily comparable across consumers or possessing a cardinal interpretation.
Trade-offA trade-off (or tradeoff) is a situational decision that involves diminishing or losing one quality, quantity, or property of a set or design in return for gains in other aspects. In simple terms, a tradeoff is where one thing increases, and another must decrease. Tradeoffs stem from limitations of many origins, including simple physics – for instance, only a certain volume of objects can fit into a given space, so a full container must remove some items in order to accept any more, and vessels can carry a few large items or multiple small items.
Balanced budgetA balanced budget (particularly that of a government) is a budget in which revenues are equal to expenditures. Thus, neither a budget deficit nor a budget surplus exists (the accounts "balance"). More generally, it is a budget that has no budget deficit, but could possibly have a budget surplus. A cyclically balanced budget is a budget that is not necessarily balanced year-to-year but is balanced over the economic cycle, running a surplus in boom years and running a deficit in lean years, with these offsetting over time.
Invisible handThe invisible hand is a metaphor used by the Scottish moral philosopher Adam Smith that describes the inducement a merchant has to keep his capital, thereby increasing the domestic capital stock and enhancing military power, both of which are in the public interest and neither of which he intended. Some later authors have broadened this to imply the unintended greater social impacts brought about by individuals acting in their own self-interests.
