Extremes of the Edgeworth Box

Extremes of the Edgeworth box concern corner allocations and their relationship to the contract curve in a two-good, two-agent exchange economy. In the standard pure-exchange setting with well-behaved preferences, the contract curve comprises all Pareto-efficient allocations, including interior tangencies and boundary corners, where no mutually beneficial trade remains. When money is introduced as a numéraire (a medium of exchange only), real feasibility and preferences are unchanged, so the contract curve remains the benchmark for efficiency. When money provides liquidity services (is valued for holding), agents may rationally abstain from trade even near interior tangencies; short-run outcomes can therefore include inaction at corners. This entry defines these objects, outlines the efficiency conditions at boundaries, and summarizes how monetary interpretations affect short-run behavior in general equilibrium and monetary economics. The Edgeworth geometry remains a real-exchange depiction; when we discuss money as a store of value, we use it as a short-run, reduced-form outside option that proxies intertemporal motives. This does not “fix” the box; it clarifies why no-trade at or near corners can be individually rational when liquidity is valued.