Kontraktusgörbe

Kontraktusgörbe, or the contract curve, is a concept in general equilibrium theory describing the set of allocations of two goods between two agents that are Pareto efficient within an Edgeworth box. It consists of the allocations at which the two agents’ marginal rates of substitution (MRS) between the goods are equal, so no small reallocation can make one agent better off without making the other worse off.

In a two-person exchange economy with fixed total endowments, interior points on the contract curve satisfy MRS1 = MRS2, equal to the slope of the feasible frontier. At these points the agents’ indifference curves are tangent to each other, and any feasible reallocation would lower at least one agent’s utility. The contract curve lies entirely within the Edgeworth box and thus contains only allocations that are mutually Pareto efficient. Boundary points may occur when an agent consumes a corner solution or when preferences have kinks, in which case MRS may be undefined and the curve may include segments corresponding to such cases.

The contract curve provides a geometric representation of gains from trade: allocations off the curve can be Pareto improved, while those on the curve are efficiency-maximizing given the endowments. It is closely related to market outcomes: under convex, smooth preferences, competitive equilibria tend to lie on or near the contract curve. In broader contexts, the contract curve is related to the core of an exchange economy and helps illustrate how different preference structures and endowments shape the set of efficient allocations.