Uitwisselingsefficiëntie: Edgeworth-box

Francis Edgeworth introduced the Edgeworth Box to study how two participants allocate a fixed amount of two goods between them.

It starts with two standard graphs, one for each participant. Since one’s gain is the other’s loss, one graph is flipped and combined with the other. This forms a box where each point shows both participants' allocations.

Imagine two individuals, Taylor and Alex, sharing ten apples and eight oranges. The Edgeworth Box maps all possible ways to distribute these goods between them. 

It assumes perfect divisibility, meaning goods can be divided into infinitely small units, allowing precise and flexible allocations.

The box has a fixed size determined by the total amount of goods. The horizontal axis represents the apples, while the vertical axis represents the oranges.

One corner of the box shows Taylor having all the goods, while the opposite corner shows Alex owning everything. A point within or on the sides of the box depicts a specific allocation.

Moving along the box’s edges or within it adjusts the allocation. Giving one person more of a good reduces the share for the other, illustrating trade-offs in distribution.