IDEAS home Printed from https://ideas.repec.org/a/spr/joecth/v21y2003i2p545-572.html
   My bibliography  Save this article

Finite allocation mechanisms: approximate Walrasian versus approximate Direct Revelation

Author

Listed:
  • Leonid Hurwicz
  • Thomas Marschak

Abstract

This paper obtains finite counterparts of previous results that showed the informational efficiency of the Walrasian mechanism among all mechanisms yielding Pareto-optimal individually rational trades in exchange economies while using a continuum of possible messages. In particular, we develop finite counterparts of the superiority, with respect to message-space dimension, of the Walrasian mechanism over Direct Revelation (DR). We measure a finite mechanism's cost by the number of its (equilibrium) messages. Our two main results are as follows: (1) For exchange economies we find that the overall (maximum) error of a (sufficiently fine) approximate Walrasian mechanism is less than the overall error of a not-more-costly approximate DR mechanism whose equilibrium outcomes are trades that are (approximately) Pareto optimal and individually rational; more generally, approximate Walrasian mechanisms are superior, in the same sense, to approximations of any continuum mechanism whose outcomes are Pareto optimal individ ually rational trades and whose message space has higher dimension than that of the Walrasian mechanism. (2) As we increase without limit the dimension of the set of environments (characteristics) defining our class of exchange economies, the extra cost of DR approximations relative to Walrasian approximations, when both achieve the same overall error, also grows without limit. Thus the informational superiority of the Walrasian mechanism emerges again when we approximate it and take the finite number of messages in the approximation as our cost measure. Copyright Springer-Verlag Berlin Heidelberg 2003

Suggested Citation

  • Leonid Hurwicz & Thomas Marschak, 2003. "Finite allocation mechanisms: approximate Walrasian versus approximate Direct Revelation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 545-572, March.
  • Handle: RePEc:spr:joecth:v:21:y:2003:i:2:p:545-572
    DOI: 10.1007/s00199-002-0320-9
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00199-002-0320-9
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marschak, Thomas, 2006. "Organization Structure," MPRA Paper 81518, University Library of Munich, Germany.
    2. 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.

    More about this item

    Keywords

    Keywords and Phrases: Mechanisms; Mechanism design; Approximating smooth mechanisms; Information processing; Exchange economies.; JEL Classification Numbers: D20; D50; D80; D83.;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joecth:v:21:y:2003:i:2:p:545-572. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Andrew Huffard) The email address of this maintainer does not seem to be valid anymore. Please ask Andrew Huffard to update the entry or send us the correct email address. General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.