Nash Equilibrium and Welfare Optimality
If is a set of social alternatives, a social choice rule (SCR) assigns a subset of A to each potential profile of individuals' preferences over A, where the subset is interpreted as the set of 'welfare optima.' A game form (or 'mechanism') implements the social choice rule if, for any potential profile of preferences, (1) any welfare optimum can arise as a Nash equilibrium of the game form (implying, in particular, that a Nash equilibrium exists) and, (2) all Nash equilibria are welfare optimal. The main result of this paper establishes that any SCR that satisfies two properties--monotonicity and no veto power--can be implemented by a game form if there are three or more individuals. The proof is constructive. Copyright 1999 by The Review of Economic Studies Limited.
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Volume (Year): 66 (1999)
Issue (Month): 1 (January)
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