This terminology is referring to the other note on Subgame Optimization. I compared Pareto optimum to Nash equilibrium there, and here there are more things to say about the Pareto optimum.
First there is still something more about the comparison. Both are about decisions. In games the individual decisions are connected and converged with each individual playing both as herself and as every other players, so that she knows where the equilibrium is and act accordingly. In competitive markets, this thinking process is replaced by simply following the price, knowing that the price contains information about the others' actions. This price-taking behavior can actually be interpreted as a solution to the game of market, where the condition of Nash equilibrium is interpreted as Pareto Optimum.
From reading Fei's lecture notes, it became clear that the Pareto Optimum (pareto efficient allocation) is nothing but a further level of constrained utility / profit maximization, which in this sense is just a pareto efficient allocation of the individual's constrained wealth / production set (?) which maximizes individual preference (utility) / production pareto efficiently. On the market exchange level, this constrained maximization becomes pareto efficient allocation of constrained total resource that maximizes group preference (utility) pareto efficiently.
pareto optimum = vector maximumdecision
theory = vector maximization
As such, the existence question of an equilibrium should be the same as the existence question of a maximum which is solved for in utility maximization with nonlinear programming conditions, e.g. KTCQ.
First there is still something more about the comparison. Both are about decisions. In games the individual decisions are connected and converged with each individual playing both as herself and as every other players, so that she knows where the equilibrium is and act accordingly. In competitive markets, this thinking process is replaced by simply following the price, knowing that the price contains information about the others' actions. This price-taking behavior can actually be interpreted as a solution to the game of market, where the condition of Nash equilibrium is interpreted as Pareto Optimum.
From reading Fei's lecture notes, it became clear that the Pareto Optimum (pareto efficient allocation) is nothing but a further level of constrained utility / profit maximization, which in this sense is just a pareto efficient allocation of the individual's constrained wealth / production set (?) which maximizes individual preference (utility) / production pareto efficiently. On the market exchange level, this constrained maximization becomes pareto efficient allocation of constrained total resource that maximizes group preference (utility) pareto efficiently.
pareto optimum = vector maximumdecision
theory = vector maximization
As such, the existence question of an equilibrium should be the same as the existence question of a maximum which is solved for in utility maximization with nonlinear programming conditions, e.g. KTCQ.
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