first-best allocations

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The set of allocations that can be achieved when the only constraints upon the economic policy-maker involve technology and resources. For example, in a two-consumer exchange economy the set of first-best allocations is given by the contract curve. First-best allocations are economically efficient, but need not be equitable. If the policy-maker is subject to constraints additional to technology and resources then only second-best allocation can be achieved. The additional constraints could include information restrictions that limit the extent of redistribution of resources that can be achieved.

Subjects: Economics.

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