Diagram Illustrating the Range of Pareto-Efficient Outcomes in the Browneville Model
This diagram visualizes the range of possible agreements in the Browneville model. It plots wages on the horizontal axis and environmental quality (0-100) on the vertical. The graph shows the firm's linear shutdown condition, representing its profitability limit, and a lower parallel isocost line. It also depicts three of the citizens' convex, downward-sloping indifference curves, which all have the same slope at any given wage. The highest curve is tangent to the shutdown line at point C (w*, E_max), the citizen-favorable outcome. The lowest curve is tangent to the lower isocost line at point F (w*, E_min), the owner-favorable outcome. An intermediate indifference curve passes through point P, another efficient allocation at wage w*, and intersects the shutdown line. The feasible set is the area bounded by the shutdown line and the lowest indifference curve.
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