compensation principle

Definition

As a basis for welfare comparisons, the idea that if a policy change (such as a tariff reduction) could be Pareto improving if it were accompanied by appropriate lump-sum transfers from winners to losers, then it is viewed as beneficial even when those transfers do not occur.

Use this term in a sentence

The compensation principle was a really good principle in my eyes and I was happy to be able to work with it.

​ Was this Helpful? YES  NO 6 people found this helpful.

You should try to follow the compensation principle and make sure all your workers get what they are owed every year.

​ Was this Helpful? YES  NO 2 people found this helpful.

The compensation principle was intelligently used to discuss how the policy changes affected each participant in the market in question.

​ Was this Helpful? YES  NO 9 people found this helpful.

Show more usage examples...

Browse Definitions by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
compensation package compensatory damages