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Implementation of the Walrasian Correspondence: The Boundary Problem

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  • Bochet,Olivier

    (METEOR)

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    Abstract

    Consider exchange economies in which preferences are continuous, convex and strongly monotonic. It is well known that the Walrasian correspondence is not Nash implementable. Maskin monotonicity (Maskin, 1999) is violated for allocations at the boundary of the feasible set. We derive an impossibility result showing that it is in fact not implementable in any solution concept. Next, we construct a sequential mechanism based on price-allocationannouncements that fits the very description of Walrasian Equilibrium. Imposing an additional domain restriction, we show that it fully implements the Walrasian correspondence in subgame perfect and strong subgame perfect equilibrium. We thus take care of the boundary problem that was prominent in the Nash implementation literature.

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    Bibliographic Info

    Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 037.

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    Date of creation: 2005
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    Handle: RePEc:unm:umamet:2005037

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    Keywords: microeconomics ;

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    1. Harrington, Joseph Jr. & Chen, Joe, 2006. "Cartel pricing dynamics with cost variability and endogenous buyer detection," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(6), pages 1185-1212, November.
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    4. Joseph E Harrington, 2001. "Optimal Cartel Pricing in the Presence of an Antitrust Authority," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 460, The Johns Hopkins University,Department of Economics, revised Jul 2002.
    5. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 527, The Johns Hopkins University,Department of Economics.
    6. Louis Kaplow & Steven Shavell, 1991. "Optimal Law Enforcement with Self-Reporting of Behavior," NBER Working Papers 3822, National Bureau of Economic Research, Inc.
    7. Motchenkova, E., 2004. "Effects of Leniency Programs on Cartel Stability," Discussion Paper, Tilburg University, Tilburg Law and Economic Center 2004-020, Tilburg University, Tilburg Law and Economic Center.
    8. Margaret C. Levenstein & Valerie Y. Suslow, 2002. "What Determines Cartel Success?," UMASS Amherst Economics Working Papers, University of Massachusetts Amherst, Department of Economics 2002-01, University of Massachusetts Amherst, Department of Economics.
    9. Hinloopen, Jeroen, 2006. "Internal cartel stability with time-dependent detection probabilities," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(6), pages 1213-1229, November.
    10. Livernois, John & McKenna, C. J., 1999. "Truth or consequences: Enforcing pollution standards with self-reporting," Journal of Public Economics, Elsevier, Elsevier, vol. 71(3), pages 415-440, March.
    11. Eberhard Feess & Markus Walzl, 2004. "Self-reporting in Optimal Law Enforcement when there are Criminal Teams," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 71(283), pages 333-348, 08.
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    Cited by:
    1. BOCHET, Olivier & MANIQUET, François, . "Virtual Nash implementation with admissible support," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -2228, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Bochet, Olivier, 2006. "Equal-Budget Choice Equivalent Solutions in Exchange Economies," Research Memorandum, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) 025, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

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