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Strategy-Proof Exchange

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  • Salvador Barbera
  • Matthew O. Jackson

Abstract

We consider the allocation of goods in exchange economies with a finite number of agents who may have private information about their preferences. In such a setting, standard allocation rules such as Walrasian equilibria or rational expectations equilibria are not compatible with individual incentives. We characterize the set of allocations rules which are incentive compatible, or in other words, the set of strategy-proof social choice functions. The social choice functions which are strategy-proof are those which can be obtained from trading according to pre-specified proportions. The number of proportions which can be accommodated is proportional to the number of agents. Such rules are necessarily inefficient, even in the limit as the economy grows.

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Bibliographic Info

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1021.

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Date of creation: Jan 1993
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Handle: RePEc:nwu:cmsems:1021

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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
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Web page: http://www.kellogg.northwestern.edu/research/math/
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References

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  1. Satterthwaite, Mark A & Sonnenschein, Hugo, 1981. "Strategy-Proof Allocation Mechanisms at Differentiable Points," Review of Economic Studies, Wiley Blackwell, vol. 48(4), pages 587-97, October.
  2. Dasgupta, Partha S & Hammond, Peter J & Maskin, Eric S, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 185-216, April.
  3. repec:fth:stanho:e-91-2 is not listed on IDEAS
  4. Blume, Lawrence & Easley, David, 1990. "Implementation of Walrasian expectations equilibria," Journal of Economic Theory, Elsevier, vol. 51(1), pages 207-227, June.
  5. Hagerty, Kathleen M. & Rogerson, William P., 1987. "Robust trading mechanisms," Journal of Economic Theory, Elsevier, vol. 42(1), pages 94-107, June.
  6. Gul, Faruk & Postlewaite, Andrew, 1992. "Asymptotic Efficiency in Large Exchange Economies with Asymmetric Information," Econometrica, Econometric Society, Econometric Society, vol. 60(6), pages 1273-92, November.
  7. Hurwicz, Leonid & Walker, Mark, 1990. "On the Generic Nonoptimality of Dominant-Strategy Allocation Mechanisms: A General Theorem That Includes Pure Exchange Economies," Econometrica, Econometric Society, Econometric Society, vol. 58(3), pages 683-704, May.
  8. Thomson, W., 1990. "Monotonic And Consistent Solutions To The Problem Of Fair Allocation When Preferences Are Single-Peaked," RCER Working Papers 231, University of Rochester - Center for Economic Research (RCER).
  9. Gibbard, Allan, 1973. "Manipulation of Voting Schemes: A General Result," Econometrica, Econometric Society, Econometric Society, vol. 41(4), pages 587-601, July.
  10. AUMANN, Robert J. & DREZE, Jacques H., . "Values of markets with satiation or fixed prices," CORE Discussion Papers RP -722, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Mas-Colell, Andreu & Vives, Xavier, 1993. "Implementation in Economies with a Continuum of Agents," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 613-29, July.
  12. Jackson, Matthew O, 1991. "Bayesian Implementation," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 461-77, March.
  13. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, Econometric Society, vol. 60(5), pages 993-1008, September.
  14. Salvador Barbera & Matthew Jackson, 1991. "A Characterization of Strategy-Proof Social Choice Functions for Economies with Pure Public Goods," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 964, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. repec:hoo:wpaper:e-91-2 is not listed on IDEAS
  16. John Moore, 1991. "Implementation in Environments with Complete Information (Now published as 'Implementation, Contracts and Renegotiation in Environments with Complete Information' in J-J Laffont (ed.), Advances in Eco," STICERD - Theoretical Economics Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE /1991/235, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  17. repec:hoo:wpaper:e-91-1 is not listed on IDEAS
  18. Satterthwaite, Mark Allen, 1975. "Strategy-proofness and Arrow's conditions: Existence and correspondence theorems for voting procedures and social welfare functions," Journal of Economic Theory, Elsevier, vol. 10(2), pages 187-217, April.
  19. Roberts, Donald John & Postlewaite, Andrew, 1976. "The Incentives for Price-Taking Behavior in Large Exchange Economies," Econometrica, Econometric Society, Econometric Society, vol. 44(1), pages 115-27, January.
  20. repec:fth:stanho:e-91-1 is not listed on IDEAS
  21. Barbera, S. & Peleg, B., 1988. "Strategy-Proof Voting Schemes With Continuous Preferences," UFAE and IAE Working Papers 91.88, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  22. Postlewaite, Andrew & Schmeidler, David, 1986. "Implementation in differential information economies," Journal of Economic Theory, Elsevier, vol. 39(1), pages 14-33, June.
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