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Implementation of the Walrasian correspondence: the boundary problem

Listed author(s):
  • BOCHET, Olivier

Consider exchange economies in which preferences are continuous, convex and strongly monotonic. It is well known that the Walrasian correspondence is not Nash implementable. Maskin monotonicity (Maskin, 1999) is violated for allocations at the boundary of the feasible set. We derive an impossibility result showing that it is in fact not implementable in any solution concept. Next, we construct a sequential mechanism based on price-allocation announcements that fits the very description of Walrasian Equilibrium. Imposing an additional domain restriction, we show that it fully implements the Walrasian correspondence in subgame perfect and strong subgame perfect equilibrium. We thus take care of the boundary problem that was prominent in the Nash implementation literature.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2005060.

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Date of creation: 00 Sep 2005
Handle: RePEc:cor:louvco:2005060
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