Islamic Economics Studies Bi-quarterly Journal

A Comparative Comparison of Murabahah and Salam Contracts through the Effect on the Utility of the Parties to the Contract (Applied to the Genetic Algorithm)

Document Type : Research Paper

Authors

1 Assistant Professor of Economics, Faculty of Humanities, Damghan University, Damghan, Iran

2 Lecture in Computer Science, Faculty of Computer Science & Mathematics, Damghan University

Abstract

The purpose of this paper is to compare the two types of Islamic finance instruments (Murabahah and Salam contracts) by influencing the contracting parties' utility. In other words, in this paper, the behavior of the economic agent in the form of the consumer of intermediate goods and the producer of intermediate goods in a two-period economy for the contracts of Murabahah and Salam is examined and optimized, and then using the genetic algorithm , The model has a numerical solution and it is determined: the total expected utility of the producer and consumer of the intermediary commodity in the financing of Murabahah method is more than the sum of the expected utility of the producer and consumer of the intermediary commodity in the financing by the inductor. In economic terms, Murabahah's contract is related to the Salam Pareto Optimal. In other words, given the degree of risk aversion, the utility of the intermediate goods producer and consumer in the Murabahah contract is more than the Salam. In this article, the necessary conditions for maximizing the utility of the parties to the contract are also extracted in the contracts of the Salam and Murabahah.

Keywords

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Islamic Economics Studies Bi-quarterly Journal
Volume 12, Issue 1 - Serial Number 23
March 2019
Pages 209-232