The authors consider the allocation of goods in exchange economies with a finite number of agents who may have private information about their preferences. They characterize the set of allocation rules that are compatible with individual incentives or, in other words, the set of strategy-proof social choice functions. Social choice functions that are strategy-proof are those that can be obtained from trading according to a finite number of prespecified proportions. The number of proportions that can be accommodated is proportional to the number of agents. Such rules are necessarily inefficient even in the limit as the economy grows. Copyright 1995 by The Econometric Society.
Volume (Year): 63 (1995)
Issue (Month): 1 (January)
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