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Strict Fairness of Equilibria in Mixed and Asymmetric Information Economies

Author

Listed:
  • Chiara Donnini

    () (Università di Napoli Parthenope)

  • Maria Laura Pesce

    () (Università di Napoli Federico II)

Abstract

We investigate the fairness property of equal-division competitive market equilibria (CME) in asymmetric information economies with a space of agents that may contain non-negligible (large) traders. We first propose an extension to our framework of the notion of strict fairness due to Zhou (1992). We prove that once agents are asymmetrically informed, any equal-division CME allocation is strictly fair, but a strictly fair allocation might not be supported by an equilibrium price. Then, we investigate the role of large traders and we provide two sufficient conditions under which, in the case of complete information economies, a redistribution of resources is strictly fair if and only if it results from a competitive mechanism.

Suggested Citation

  • Chiara Donnini & Maria Laura Pesce, 2019. "Strict Fairness of Equilibria in Mixed and Asymmetric Information Economies," CSEF Working Papers 528, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:528
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    Keywords

    Asymmetric information; mixed markets; strict fairness; competitive equilibrium.;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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