Optimization of Production Decisions Under Resource Constraints and Community Priorities

Abstract

The paper proposes an analytical solution of the problem of optimal allocation of resources in the game of two parties, based on the production function of Cobb-Douglas with constant returns under changing scale of production. The Edgeworth box is used to derive the main scientific findings of this research, namely the analytic representation of contract curve, community indifference curve, a production possibility frontier curve under Cobb-Douglas production function, and an analytical representation of the solution of maximization income in solving the resource allocation problem. The proposed technique is more suitable for practical application compared with prevailing theoretical resource allocation models based on Cobb-Douglas production function.