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A unique informationally efficient and decentralized mechanism with fair outcomes

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Abstract

It is shown that any informationally decentralized mechanism that realizes fair allocations over the class of classical pure exchange environments has a message space of dimension no smaller than the number of agents times the number of commodities. Since the equal income Walrasian mechanism, in which all agents take prices parametrically and maximize utility subject to the average income constraint, realizes fair outcomes over the class of classical pure exchange environments and has a message space of that dimension, it is informationally efficient. Further, it is shown that it is the unique informationally efficient mechanism realizing fair allocations. Copyright 1993 by The Econometric Society.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 7.

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Date of creation: Nov 1991
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Handle: RePEc:upf:upfgen:7

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  1. Calsamiglia, Xavier, 1977. "Decentralized resource allocation and increasing returns," Journal of Economic Theory, Elsevier, vol. 14(2), pages 263-283, April.
  2. Stefan Reichelstein & Stanley Reiter, 1985. "Game Forms with Minimal Strategy Spaces," Discussion Papers 663, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Schmeidler, David & Vind, Karl, 1972. "Fair Net Trades," Econometrica, Econometric Society, vol. 40(4), pages 637-42, July.
  4. Hurwicz, Leonid & Majumdar, Mukul, 1988. "Optimal intertemporal allocation mechanisms and decentralization of decisions," Journal of Economic Theory, Elsevier, vol. 45(2), pages 228-261, August.
  5. Reichelstein, Stefan, 1984. "Incentive compatibility and informational requirements," Journal of Economic Theory, Elsevier, vol. 34(1), pages 32-51, October.
  6. Chander, Parkash, 1983. "On the Informational Size of Message Spaces for Efficient Resource Allocation Processes," Econometrica, Econometric Society, vol. 51(4), pages 919-38, July.
  7. Mount, Kenneth & Reiter, Stanley, 1974. "The informational size of message spaces," Journal of Economic Theory, Elsevier, vol. 8(2), pages 161-192, June.
  8. Chander, Parkash, 1983. "On the informational efficiency of the competitive resource allocation process," Journal of Economic Theory, Elsevier, vol. 31(1), pages 54-67, October.
  9. Panzer, Elisha A & Schmeidler, David, 1974. "A Difficulty in the Concept of Fairness," Review of Economic Studies, Wiley Blackwell, vol. 41(3), pages 441-43, July.
  10. Champsaur, Paul & Laroque, Guy, 1981. "Fair allocations in large economies," Journal of Economic Theory, Elsevier, vol. 25(2), pages 269-282, October.
  11. Campbell,Donald E., 1987. "Resource Allocation Mechanisms," Cambridge Books, Cambridge University Press, number 9780521319904.
  12. Calsamiglia, Xavier, 1982. "On the size of the message space under non-convexities," Journal of Mathematical Economics, Elsevier, vol. 10(2-3), pages 197-203, September.
  13. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 263-82, April.
  14. Dasgupta, Swapan & Mitra, Tapan, 1988. "Characterization of intertemporal optimality in terms of decentralizable conditions: The discounted case," Journal of Economic Theory, Elsevier, vol. 45(2), pages 274-287, August.
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Cited by:
  1. Alan Kirman, 2006. "Demand Theory and General Equilibrium: From Explanation to Introspection, a Journey down the Wrong Road," History of Political Economy, Duke University Press, vol. 38(5), pages 246-280, Supplemen.
  2. Jose Aizpurua & Antonio Manresa, 1994. "A decentralized and informationally efficient mechanism realizing fair outcomes in economies with public goods," Review of Economic Design, Springer, vol. 1(1), pages 141-158, December.
  3. Bosch-Domenech, Antoni & Silvestre, Joaquim, 1997. "Credit Constraints in General Equilibrium: Experimental Results," Economic Journal, Royal Economic Society, vol. 107(444), pages 1445-64, September.
  4. Guoqiang Tian, 2006. "The unique informational efficiency of the competitive mechanism in economies with production," Social Choice and Welfare, Springer, vol. 26(1), pages 155-182, January.
  5. Thomson, William, 2011. "Chapter Twenty-One - Fair Allocation Rules," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 2, chapter 21, pages 393-506 Elsevier.
  6. Takashi Ishikida & Thomas Marschak, 1996. "Mechanisms that efficiently verify the optimality of a proposed action," Review of Economic Design, Springer, vol. 2(1), pages 33-68, December.
  7. Thomas Marschak, 1996. "On economies of scope in communication," Review of Economic Design, Springer, vol. 2(1), pages 1-31, December.
  8. Tian, Guoqiang, 2001. "The Unique Informational Effciency of the Lindahl Allocation Process in Economies with Public Goods," MPRA Paper 41229, University Library of Munich, Germany, revised Oct 2005.
  9. Tian, Guoqiang, 2004. "On the Informational Requirements of Decentralized Pareto-Satisfactory Mechanisms in Economies with Increasing Returns," MPRA Paper 41226, University Library of Munich, Germany, revised Oct 2006.
  10. Marschak, Thomas & Reichelstein, Stefan, 1998. "Network Mechanisms, Informational Efficiency, and Hierarchies," Journal of Economic Theory, Elsevier, vol. 79(1), pages 106-141, March.

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