contract curve



  • noun a series of points along a curve in the Edgeworth box which indicate where two parties get the same utility from a commodity on the curve and less utility from a commodity away from the curve

Health Economics

  • (written as Contract Curve)
    A locus in an Edgeworth Box showing a series of Pareto-optimal distributions of a fixed quantity of two goods between two people, each distribution being an allocation of the two goods between the two people that can be reached by (assumed costless) contracting (trading). The contract curve is found by connecting the tangencies of the two individuals' indifference curves. In the figure, the curve 0 A 0 B is the contract curve. Selection of an optimal point on the contract curve requires value judgments regarding the distribution of welfare between the two individuals.