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Informational Size and Incentive Compatibility

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  • Richard McLean
  • Andrew Postlewaite

Abstract

We examine a general equilibrium model with asymmetrically informed agents. The presence of asymmetric information generally presents a conflict between incentive compatibility and Pareto efficiency. We present a notion of informational size and show that the conflict between incentive compatibility and efficiency can be made arbitrarily small if agents are of sufficiently small informational size. Copyright The Econometric Society 2002.
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Suggested Citation

  • Richard McLean & Andrew Postlewaite, "undated". "Informational Size and Incentive Compatibility," CARESS Working Papres 99-14, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    • Handle: RePEc:wop:pennca:99-14
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    File URL: http://www.ssc.upenn.edu/econ/CARESS/CARESSpdf/99-14.pdf
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    References listed on IDEAS

    as
    1. Gul, Faruk & Postlewaite, Andrew, 1992. "Asymptotic Efficiency in Large Exchange Economies with Asymmetric Information," Econometrica, Econometric Society, vol. 60(6), pages 1273-1292, November.
    2. McAfee, R Preston & Reny, Philip J, 1992. "Correlated Information and Mechanism Design," Econometrica, Econometric Society, vol. 60(2), pages 395-421, March.
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