The efficiency hypothesis is the norm in many economic contexts and has often been applied to household behaviour. Nevertheless, careful justification is needed. In a static context, this assumption boils down to the requirement that married partners find a way to seize opportunities that make them both better. Due to the closeness and durability of the relationship, both partners are aware of the preferences and actions of the other in general. They can cooperate by concluding a binding agreement. The implementation of these agreements can be achieved through mutual care and trust, social norms and formal legal treaties. Alternatively, the agreement can be supported by repeated interactions, including the possibility of sanctioning. A great literature in game theory, based on several “popular theories”, suggests that in such situations, efficiency should prevail.3 At least, efficiency can be considered a natural measure. This is analogous to technical or productive efficiency at the enterprise level. What is said here is that there are many situations where it is possible to increase total output in an economy, simply by redistributing the factors of production at no additional cost. This is due to the fact that the factors of production are more productive in some applications than in others.
In a competitive economy, producers offer by factor of production until they are assigned to their most productive use. It is easy to show that the allocation xa pareto is effective: since all weights are positive, any improvement pareto would increase the sum, which goes against the definition of xa. Take as an example an element assignment problem with two elements that Alice evaluates with 3,2 and George 4,1. Look at the attribution alice gives to the first and second George where the utility profile is (3,1): For example, imagine that you and a friend decide how to share a hearty pizza for dinner. You`re so hungry that you want to eat all the pizza yourself, but in the interest of fairness, you both decide to each have half the pizza. Is it an efficient distribution of pareto pizza? Yes! The only way to improve one of you – the only way a person can have more pizza – is to make the other person less good – by taking a piece of their half pizza (pretend there is no other pizza at that time). Any strong pareto improvement is also a weak pareto improvement. It is not the other way around; For example, consider a resource allocation problem with two resources evaluated by Alice at 10.0 and George 5:5. .
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