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Nash Implementation in Production Economies with Unequal Skills : A Complete Characterization

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  • Yoshihara, Naoki
  • Yamada, Akira

Abstract

In production economies with unequal labor skills, one of the intrinsic features for Nash implementation problems is the lack of information about individual skills, which makes the planner ignorant to the set of feasible allocations in advance of production. Given this intrinsic feature, the paper firstly introduces a new axiom, Non-manipulability of Irrelevant Skills (NIS), which together with Maskin Monotonicity constitute the necessary and sufficient conditions for Nash implementation. Secondly, the paper defines some conditions for natural mechanisms which seem relevant, and then shows that any efficient allocation rule is Nashimplementable by the natural mechanisms if and only if it satisfies a slightly stronger variation of NIS and Supporting Price Independence. Following these characterizations, it is shown that there is a Maskin monotonic allocation rule which is not implementable when information about individual skills is absent. In contrast, there are many fair allocation rules which are known to be non-implementable in the present literature, but are implementable by the natural mechanisms given in this paper.

Suggested Citation

  • Yoshihara, Naoki & Yamada, Akira, 2010. "Nash Implementation in Production Economies with Unequal Skills : A Complete Characterization," Discussion Paper Series a536, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:hituec:a536
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    Cited by:

    1. Kaname Miyagishima, 2015. "Implementability and equity in production economies with unequal skills," Review of Economic Design, Springer;Society for Economic Design, vol. 19(3), pages 247-257, September.

    More about this item

    Keywords

    Unequal labor skills; Nash implementation; Nonmanipulability of Irrelevant Skills;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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