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Nash Equilibrium and Welfare Optimality

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  • Eric Maskin

Abstract

If A is a set of social alternatives, a social choice rule (SCR) assigns a subset of A to each potential profile of individuals' preferences over A, where the subset is interpreted as the set of "welfare optima." A game form (or "mechanism") implements the social choice rule if, for any potential profile of preferences, (i) any welfare optimum can arise as Nash equilibrium of the game form (implying, in particular, that a Nash equilibrium exists) and, (ii) all Nash equilibria are welfare optimal. The main result of this paper establishes that any SCR that satisfies two properties - monotonicity and no veto power - can be implemented by a game form if there are three or more individuals. The proof is constructive.

Suggested Citation

  • Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers 1829, Harvard - Institute of Economic Research.
  • Handle: RePEc:fth:harver:1829
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