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The third welfare theorem establishing that within the fragility-dominated domain, Δ-Λ equilibria achieve Pareto improvements over unstructured allocations. This theorem justifies regenerative institutional design precisely where it's most needed—in fragility-dominated sectors.
In education (fragility-dominated), a PSC structure (Δ-Λ equilibrium) produces better outcomes than direct market provision—the theorem explains why structural intervention improves welfare here but may not elsewhere.
GERC Section 4