Worked-example setupScope and assumptions
- Rowan Advisory, Vale Analytics, and all output quantities are fictional teaching facts from the linked dataset.
- Each producer receives one comparable analyst-day, uses a fixed linear technology, and applies the same supplied output and quality definitions.
- The comparison excludes prices, wages, contracting, switching, coordination, quality-verification, and distributional effects.
- Period
- One fictional analyst-day per producer
- Units
- Completed outputs per analyst-day; opportunity cost in units of the forgone output
- Rounding
- Exact ratios
Compare like with like
Give each fictional producer one comparable analyst-day and hold output quality constant.
| Producer | Maximum reconciliations | Maximum forecasts | Forecasts forgone per reconciliation | Reconciliations forgone per forecast |
|---|---|---|---|---|
| Rowan | 12 | 6 | 0.5 | 2 |
| Vale | 4 | 4 | 1.0 | 1 |
Rowan can produce more of either output, so Rowan has absolute advantage in both. That comparison asks who can produce more with the common resource.
Compare sacrifices, not just maxima
Rowan gives up half a forecast for one more reconciliation; Vale gives up one forecast. Rowan has comparative advantage in reconciliations because Rowan's opportunity cost is lower.
Read the reciprocal column for forecasts. Rowan gives up two reconciliations per forecast, while Vale gives up one. Vale has comparative advantage in forecasts despite having absolute advantage in neither output.
The reciprocal pattern is not a contradiction. Comparative advantage assigns relative cost within each producer's alternatives. Absolute advantage compares output levels across producers.
Interpretation boundary
The result identifies a specialization direction inside this model. It does not establish that a services contract is lawful, profitable, reliable, fair, or operationally feasible. Before recommending actual reallocation, investigate prices, quality, professional duties, transition and coordination costs, bargaining power, workload, and who bears risk.
Verified calculation · economics foundations analysis
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- comparative advantage
- 1 field
Inspect data
{
"rowan_vale": {
"output_a_name": "reconciliations",
"output_b_name": "forecasts",
"producers": {
"rowan": {
"baseline_output_a": 8,
"baseline_output_b": 2,
"max_output_a": 12,
"max_output_b": 6
},
"vale": {
"baseline_output_a": 3,
"baseline_output_b": 1,
"max_output_a": 4,
"max_output_b": 4
}
},
"proposed_b_per_a": 0.75
}
}Recomputed result
| Measure | Value |
|---|---|
| rowan absolute advantage output a | 1 |
| rowan absolute advantage output b | 1 |
| rowan comparative advantage output a | 1 |
| rowan opportunity cost output a in output b | 0.5 |
| rowan opportunity cost output b in output a | 2 |
| vale comparative advantage output b | 1 |
| vale opportunity cost output a in output b | 1 |
| vale opportunity cost output b in output a | 1 |