A note on the two person exchange game (Q797461)

The Nash and competitive solutions of an exchange game are generally different. The author notices that the relative wealths and relative initial utility levels determine which solution is better for a given trader. In the author's words: ''If preferences are identical, the more wealthy trader will do better under the competitive solution whereas the trader with the higher initial utility will receive a higher final utility level under the Nash solution''. The author's attention is restricted to \(C^ 2\) utility functions. A special case, the Cobb-Douglas utility function, is presented along with a numerical example. The author informally argues that often the Nash and competitive solutions will be ''close together in the core''.