When acting upon the potential compensation criterion,the winners must compensate the losers to the exchange.

Question

Quizplus · Accepted Answer

The potential compensation criterion, also known as the Kaldor-Hicks efficiency criterion, suggests that an economic transaction is efficient if those who benefit could in theory compensate those who lose out, making everyone at least as well off as before. It does not require that compensation actually be paid.

When Acting Upon the Potential Compensation Criterion,the Winners Must Compensate