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Impossibility results for parametrized notions of efficiency and strategy-proofness in exchange economies

  • Cho, Wonki Jo
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    We study a standard model of exchange economies with individual endowments. It is well known that no rule is individually rational, efficient, and strategy-proof. In order to quantify the extent of this impossibility, we parametrize axioms on allocation rules. Given an axiom A, a parametrization of A is a continuum of axioms {δ-A}δ∈[0,1] such that (i) δ-A is equivalent to A if and only if δ=1; (ii) δ-A is vacuous if and only if δ=0; and (iii) for each pair δ,δ′∈[0,1] with δ<δ′, δ′-A implies δ-A. Thus, as δ decreases from 1 to 0, δ-A weakens monotonically, eventually to a vacuous requirement. We consider two parametrizations {δ-efficiency}δ∈[0,1] and {δ-strategy-proofness}δ∈[0,1], and investigate their compatibility with individual rationality for the class of two-agent economies defined on the linear preference domain. We show that (i) for each δ∈(0,1], no rule is individually rational, δ-efficient, and strategy-proof; and (ii) for each δ∈(0,1], no rule is individually rational, efficient, and δ-strategy-proof.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0899825614000475
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    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 86 (2014)
    Issue (Month): C ()
    Pages: 26-39

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    Handle: RePEc:eee:gamebe:v:86:y:2014:i:c:p:26-39
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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