I am an avid player of Pokemon Go, and I recently discovered a new Pokemon I had never before seen: Shelmet. This is a Pokemon from the 5th generation of games. Since I had only ever played the 1st, 2nd, and 3rd generations, Shelmet was a completely unknown Pokemon to me. But what stood out to me about it was that it had different evolution requirements than I had seen for any other Pokemon. While usually it takes 25 and then 100 units of Pokemon specific candies to evolve something in Pokemon Go, Shelmet had a different system. To evolve your Shelmet, you need to either trade it or spend 200 Shelmet candies.
Shelmet only has one evolution. In my experience, Pokemon with only one evolution usually only require 50 candies to evolve. If I value evolving my Shelmet at 50 candies, but I end up spending 200 candies to do so, I have spent 150 extra candies because the 'evolution market', as it were, is inefficient. That excess of 150 unnecessary candies is called a Deadweight Loss.
Alternatively, I could trade my Shelmet to my friend. If he and I were to trade each other our Shelmets, we can do so at no candy cost and we would both end up succeeding in getting our Pokemon to evolve. If we both value evolving our Pokemon at 50 candies but end up spending none, we have created a consumer/provider surplus of 50 and 50, totaling in 100 candies. A 100 candy surplus is far better than a combined deadweight loss of 300.
By recognizing the benefits of trading our Shelmet instead of working hard to evolve it, we have both saved a lot of time and energy. If we had tried to do it on our own, we would have ended up walking farther distances and using more Pokeballs all in an effort to generate more Shelmet candies. Again, this excessive amount of Shelmet candies would ultimately result in a deadweight loss. So by simply choosing to trade with each other, we have saved valuable time and energy that can be better used studying for exams or picking out Valentines gifts for our wives. In other words, by engaging in trade, we can avoid needless waste and make the world a better place.
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