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On Efficient Distribution With Private Information

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  • Andrew Atkeson
  • Robert E. Lucas

Abstract

This paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with many consumers, each of whom is subject to private, idiosyncratic taste shocks. We propose a recursive method for finding feasible allocations that are incentivecompatible and that are Pareto optimal within this set. The method is applied to several parametric examples. We find that in an efficient allocation the degree of inequality continually increases, with a diminishing fraction of the population receiving an increasing fraction of the resources. We discuss the extent to which these allocations can be decentralized via market arrangements.

Suggested Citation

  • Andrew Atkeson & Robert E. Lucas, 1992. "On Efficient Distribution With Private Information," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 427-453.
  • Handle: RePEc:oup:restud:v:59:y:1992:i:3:p:427-453.
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    File URL: http://hdl.handle.net/10.2307/2297858
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