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A Unique Informationally Efficient Allocation Mechanism In Economies With Consumption Externalities

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  • Guoqiang Tian

Abstract

This article investigates the informational requirements of resource allocation processes in pure exchange economies with consumption externalities. It is shown that the distributive Lindahl mechanism has a minimal informational size of the message space, and thus it is informationally the most efficient allocation process that is informationally decentralized and realizes Pareto-efficient allocations over the class of economies that include nonmalevolent economies. Furthermore, it is shown that the distributive Lindahl mechanism is the unique informationally efficient decentralized mechanism that realizes Pareto-efficient and individually rational allocations over a certain class of nonmalevolent economies. Copyright 2004 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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  • Guoqiang Tian, 2004. "A Unique Informationally Efficient Allocation Mechanism In Economies With Consumption Externalities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 79-111, February.
  • Handle: RePEc:ier:iecrev:v:45:y:2004:i:1:p:79-111
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    Cited by:

    1. Emanuela Randon & Peter Simmons, 2007. "Correcting Market Failure Due to Interdependent Preferences: When Is Piecemeal Policy Possible?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(5), pages 831-866, October.
    2. Guoqiang Tian & Liyan Yang, 2009. "Theory of negative consumption externalities with applications to the economics of happiness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(3), pages 399-424, June.
    3. Segal, Ilya, 2007. "The communication requirements of social choice rules and supporting budget sets," Journal of Economic Theory, Elsevier, vol. 136(1), pages 341-378, September.
    4. Meng, Dawen & Tian, Guoqiang, 2013. "Multi-task incentive contract and performance measurement with multidimensional types," Games and Economic Behavior, Elsevier, vol. 77(1), pages 377-404.
    5. Ilya Segal, 2004. "The Communication Requirements of of Social Choice Rules and Supporting Budget Sets," Economics Working Papers 0039, Institute for Advanced Study, School of Social Science.
    6. Marschak, Thomas, 2006. "Organization Structure," MPRA Paper 81518, University Library of Munich, Germany.
    7. Nisan, Noam & Segal, Ilya, 2006. "The communication requirements of efficient allocations and supporting prices," Journal of Economic Theory, Elsevier, vol. 129(1), pages 192-224, July.

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